The Role of Hong Kong in the Guangdong-Hong Kong-Macao Greater Bay Area
Photo Credit: Wikimedia Commons
By Tai Wei Lim

The Role of Hong Kong in the Guangdong-Hong Kong-Macao Greater Bay Area

Sep. 05, 2017  |     |  0 comments


An interesting role that Hong Kong plays is to serve as a template for China to develop capitalism with Chinese characteristics. Hong Kong has been a living economic laboratory for socialist China to observe and selectively apply capitalist market features that have led to the rise of the Chinese economy. Hong Kong’s capital, technology, skills, human talents, and entrepreneurship have also spilled into China.

 

Since Hong Kong’s return to China in 1997, it has been transformed into a de facto lab for capitalist development within China’s own turf. China since then has been able to shape Hong Kong’s destiny in addition to observing the territory. In that fateful year of the handover, Hong Kong was sheltered from the 1997 Asian Financial Crisis when major East Asian currencies came under speculative attacks. The Thai Baht was badly battered. South Korean housewives were compelled to bring out their family jewellery and gold to donate to the country’s reserves. Indonesia experienced a regime change and saw the long-reigning Suharto regime toppled and the country democratized.

 

China purchased Hong Kong dollars to prop up its value. Beijing was determined to stop the contagion by keeping the value of the renminbi stable. To a large extent, the Chinese succeeded in arresting the contagion within Hong Kong and were widely praised for keeping the renminbi stable in the process, as it contributed to regional stability.

 

China also came to the rescue five years later when Hong Kong confronted another major crisis. In February 2003, the economic downturn caused by the Severe Acute Respiratory Syndrome (SARS) was contained by China. It sped up the economic recovery process and introduced preferential policies such as the Closer Economic Partnership Arrangement (CEPA) and “free-to-go” policies that opened up the Hong Kong tourism sector to China tourists from the main First Tier cities with less travel restrictions. CEPA facilitated the export of certain categories of Hong Kong goods and services to China without tariffs or trade restrictions. These two policies helped Hong Kong recover from the effects of SARS faster, even though other tourists shunned the territory for fear of infection.

 

In effect, the Chinese economic reforms and the rise of China served to integrate both economies stronger together economically, making them mutually symbiotic, especially in the banking and finance sectors as well as general trading activities. Initially, Hong Kong was a major component of this symbiotic relationship, given its advanced capitalist economy status and the role of its capital in southern China.

 

With the rise of China, Hong Kong has become less significant economically in quantitative terms (e.g., making up less of China’s overall GDP) but still retains its intellectual importance and financial/services center significance for China’s economic globalization. As an East-West hybrid, Hong Kong remains one of China’s windows to the world, especially during the pre-reform isolationist period of China, during China’s reform-era outreach to the world, and may eventually evolve in the post-reform era to become China’s most important offshore renminbi trading center. Hong Kong’s intermediary role remains important, albeit a changing one to better reflect the relative strengths of Hong Kong and China today.



Hong Kong, Zhuhai and Macau are regionalized into a “Greater Bay Area” linked by the globe’s lengthiest bridge connecting Hong Kong International Airport with Macau and Zhuhai.


 

The dean of The Wharton School Geoffrey Garrett detects more economic integration between Hong Kong and China with closer Hong Kong-Shenzhen connections, especially since Hong Kong has access to the national consumer market of China, including the highly-developed Guangdong province, and Hong Kong has its British-inherited rule of law and relative political/social/economic freedoms which can provide access to international financial markets and the global economy for Chinese money. It has truly become a symbiotic relationship.

 

Hong Kong’s position in China is likely to be increasingly de-privileged. While it faces increasing competition from First Tier Chinese cities like Shanghai, its neighbor Shenzhen is rapidly overtaking Hong Kong in many indicators. Shenzhen is considered by some to be the “biggest urban development project in human history,” and has grown under the economic reforms of Deng Xiaoping from a fishing outpost of approximately 200,000 residents in 1986 to over ten million today.

 

Shenzhen is an expanding megacity, and is the second-fastest growing city in the world. Shenzhen, Beijing, and Shanghai are considered to be the most economically important cities in mainland China today. Shenzhen is often conceptualized as China’s Silicon Valley for its innovative energies, incubators, its status as China’s second most important financial hub after Shanghai, and it is home base to some of China’s most innovative companies like Huawei and Tencent (even ranking ahead of Hangzhou which hosts Alibaba).

 

These cities (Hangzhou, Shenzhen and Shanghai) all have the potential to complement Hong Kong and collectively grow together as China’s mega-financial centers. As Shenzhen acquires the entrepreneurial spirit, economic dynamism, capitalist instincts, and savviness of Hong Kong, combined with Silicon Valley start-up energies, there may be a chance that Shenzhen may become economically open like Hong Kong, although political prospects remain unclear at the point of this writing.

 

The rise of Qianhai is integrating Hong Kong closer with China. Qianhai, which was created out of 25 million square meters of reclaimed land in the boundary between Hong Kong and Shenzhen, is known officially as the “Shenzhen-Hong Kong Modern Service Industry Cooperation district.” The Qianhai and Shekou Free Trade Area (FTA) Trade Facilitation Index published by the Institute for Free Trade Zone Research of Sun Yat-sen University in Guangzhou argues that Shenzhen’s Qianhai and Shekou FTA’s role as a trading hub could be expanded since business interactions between the FTA and the Belt and Road Initiative countries and international trade with the FTA are lagging behind.

 

Qianhai has become the new bridging region between Shenzhen and Hong Kong and will eventually serve the business needs of the national economy. Interactions between Qianhai and Shekou FTA may become a model for cooperation in the Guangdong-Hong Kong-Macao Greater Bay Area with its logistical, transportation and human resource infrastructure. Some have identified a need to assist the trading opportunities and finances of small and medium-sized enterprises as well as employing more senior financial personnel currently in high demand within this region.

 

Besides building a rapid train between downtown Hong Kong and Shenzhen with commuting time of only 15-20 minutes, border procedures are carried out in train stations without the usual cross-boundary controls. Hong Kong, Zhuhai and Macau are then regionalized into a “Greater Bay Area” linked by the globe’s lengthiest bridge connecting Hong Kong International Airport with Macau and Zhuhai. 


While Hong Kong has to be fully aware of the competitive energies of Shenzhen, the two can rub off their strengths on each other. Hong Kong has the openness that can further enhance Shenzhen’s innovation while Shenzhen has the scale, talents and conurbations of incubators and venture companies which complement the funding opportunities in Hong Kong’s mature banking and finance sector. Those who can seize the opportunities are likely to prosper from this development.

 

References

 

Garrett, G. (25 Jul 2017). INNOVATION Bay Area 2.0: How Hong Kong and China are Forging a New Innovation Economy. Wharton, University of Pennsylvania. Retrieved from http://knowledge.wharton.upenn.edu/article/bay-area-2-0-hong-kong-china-forging-new-innovation-economy/

 

Diaz, R. I., Cheung, D. and Lee, A. P. (n.d.). Hong Kong and Macau: Economic Bridges to Mainland China. The Alliance for Networking Visual Culture, University of Southern California. Retrieved from http://scalar.usc.edu/anvc/travel-and-culture-in-hong-kong-and-macau/hong-kong-and-macau-economic-bridges-to-mainland-china

 

Zhou, M. (27 April 2017). Report highlights fortunes of Qianhai & Shekou FTA. China Daily. Retrieved from http://www.chinadaily.com.cn/business/2017-04/27/content_29104922.htm

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