Hong Kong – Flagship of the Bay Area Development

The 19th National Congress of the Communist Party of China (CPC) set out a clear direction for the nation’s development, with the Central Committee of the CPC recognising the development of the Guangdong–Hong Kong–Macao Greater Bay Area (the Bay Area Development) as a key project – but what exactly is the development’s agenda?

The Greater Bay Area will be developed in accordance with requirements for China’s international development, to meet the needs of this era and the objective development status of its region. In an Organisation for Economic Co-operation and Development forum convened in Paris some decades ago, it was asserted that future development of the world’s economy would include not only competition between nations or cities, but also competition between city clusters. Internationally, examples of this include the major bay areas in San Francisco, Tokyo and New York, and the Hangzhou Bay Area and the Bay Area Development in China.

Additionally, this is a demand of the ‘new era’ of Chinese politics and power. The world has transformed from a predominantly industrial economy into a knowledge-based economy, and some argue that we are now in an innovation-based economy. The organic combination of industry and financial innovation requires the development of a bay area or a city cluster.

Finally, the Bay Area Development meets the growth needs of the Pearl River Delta (PRD), Hong Kong and Macao. Shenzhen, in the PRD, is becoming one of the world’s most innovative cities – along with Dongguan, it has developed leading manufacturing industries. Macao has made the most of the ‘one country, two systems’ advantages of tourism. Similarly, Hong Kong has exerted its strengths of talent and intelligence. By utilising each other’s expertise, the cities will complement one another in the process of diverse development.

Stronger together

Diversity could offer a unique contribution to the construction of the Bay Area Development. During a visit to the region in July 2017, President Xi Jinping declared that Hong Kong can seize three great opportunities – construction of the Bay Area Development, the Belt and Road Initiative and renminbi internationalisation. Hong Kong can contribute to national Chinese strategy in three aspects. 

The first aspect is the attraction and cultivation of talent. With regard to an innovative economy, talent not only refers to human labour, but to innovative capacity and knowledge.

By connecting Hong Kong to the PRD, biotechnology could be a major project in the Greater Bay Area through collaboration and innovation

Hong Kong has a unique advantage in attracting talent with a well-developed regulatory mechanism. It is one of the world’s least fettered economies – an environment in which a lot of talent prefers to work and reside. The city has a straightforward and low-rate tax system, as well as superior education and medical care, creating a comfortable working and living environment. It offers a lifestyle that caters to the expectations and requirements of elite talent. For example, within the San Francisco city cluster lies Silicon Valley, where Google is headquartered. However, 40% of Google’s employees prefer to live in San Francisco rather than Silicon Valley. With a similiarly excellent living environment, Hong Kong could also cultivate and attract talent from across the region.

Second, Hong Kong is an international financial centre helping to push the innovation economy. Hong Kong should contemplate making full use of the financial market and providing further support to the innovation economy, especially by investing in start-up enterprises at an early stage of the process and helping them with the requirements and procedures of becoming a listed company.

Third, Hong Kong can support the development of biological science and technology, including medical treatment. Hong Kong boasts two world-leading schools of medicine and several internationally prominent scientists. However, due to its small‑scale market, it has limited clinical experience. By connecting Hong Kong to the PRD, biotechnology could be a major project in the Greater Bay Area through collaboration and innovation.

Collaboration can also be facilitated by the following: 

• Free flow of various economic factors, including human resources, commerce, information and services. For example, a green path for talents from Hong Kong to mainland China or more punitive taxation policies for Hong Kong and Macao residents for stays on the Chinese mainland exceeding 183 days.
• Developing joint research and collaboration in various fields.
• With construction of the Bay Area Development currently under the leadership of the National Development and Reform Commission, a higher-level co-ordination mechanism could bring about a more prosperous Greater Bay Area.

This article is part of The IFF China Report 2018, which draws mainly on content provided by China-headquartered think tank, the International Finance Forum, and is published in association with Central Banking.