HONG KONG: Why China's Greater Bay Masterplan May Not Be So Great

HONG KONG: Why China's Greater Bay Masterplan May Not Be So Great
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The plan to unite nine Chinese cities with Hong Kong and Macau reads well on paper but innovation is about more than just pie in the sky political programs.

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With the new cross border high-speed rail link opening last month and the much-awaited Hong Kong-Zhuhai bridge scheduled to be operational later this year, the major transport infrastructure linking Hong Kong to the Greater Bay Area (GBA) will finally be in place.

Chinese President Xi Jinping’s megalopolitic vision has Hong Kong officials falling over themselves to grasp the potential of integrating nine Chinese cities and two special administrative regions into an innovation powerhouse to rival Silicon Valley.

The plan is to link up the 68 million people of Hong Kong, Macau, Guangzhou, Shenzhen, Zhuhai, Foshan, Zhongshan, Dongguan, Huizhou, Jiangmen and Zhaoqing, which together account for output of about US$1.4 trillion, into a technology-driven business hub.

GBA_Visual_2_from_www_bayarea_gov_hk
Credit: Greater Bay Area HK
The sweeping six-lane expanse of the Zhuhai-Hong Kong bridge will connect Zhuhai with Hong Kong International Airport when it eventually opens.

According to a PwC report on the plan, Chinese Premier Li Keqiang in March said the GBA would “give full play to the distinctive strengths of Hong Kong and Macau, and elevate their positions and roles in China’s economic development and opening up.”

Herein lies the crux of the GBA: to leverage the internationalism of Hong Kong and Macau to catapult the innovation ongoing in cities like Shenzhen, home of technology giants like Tencent Holdings, Midea Group and Huawei, out along the Maritime Silk Road and into the global market.

In theory, the plan appears viable, particularly as Guangdong Province has long been an engine of cross-border commerce, accounting for about 11 percent of China's GDP in 2016.

However, some suspect the GBA is a political agenda masquerading as a business plan, and experts draw attention to critical issues which, if left unresolved, could result in the initiative falling flat.

“If you look at the Big Bay, we are just competitors and collaboration is not happening,” says Dr. Collin Wong of Hong Kong’s Hang Seng Management College.

Wong co-authored a report published last November titled “Logistics and Trade Facilitation in Guangdong-Hong Kong-Macau Bay Area: Stakeholders Concerns, Comments from Central Government, and Policy Recommendations.”

The report specified concerns on the alignments of systems and policies within the GBA and flagged a core obstacle to its success: While Silicon Valley or Tokyo Bay encompass cities, educational institutions and businesses clustered within a national fiscal regime, the GBA is a hodgepodge of mismatched policies.

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Credit: Via Dr Collin Wong
Dr. Collin Wong of Hong Kong’s Hang Seng Management College believes the Greater Bay Area project is destined for failure unless more is done to unify fiscal and economic policy among its 11 cities.

Wong explains that the 11 cities designated for the GBA host different incentive schemes, tax reduction policies and local business practices.

This is in addition to the broader challenges presented by one country with three social, economic and political systems: those of China, Hong Kong and Macau. There has been talk of a preferential or unified tax regime for the GBA, but there is no sign at present of detailed proposals. If anything, Hong Kong and China are moving further apart when it comes to tax.

Effective economic integration with multiple systems in place for tax, business incentives, subsidies, tariffs, and start-up schemes might prove impossible.

“This needs to be ironed out or it’s not going to happen,” says Wong, adding that the lack of a unified regime is not the principal obstacle the GBA faces.

“The biggest challenge is collaboration between regional governments and how the public perceives this whole project,” she adds, noting that in Hong Kong that perception is decidedly mixed.

Surveys from local chambers of commerce indicate that businesses overwhelmingly support the initiative and its commercial potential. But a November 2017 poll by the Proactive Think Tank and the Hong Kong Guangdong Youth Association found that 55.2 percent of 833 young people aged between 15 and 34 had never heard of the GBA.

High technology start-ups in Hong Kong can feel marginalized by local economic policy focused on finance, real estate, retail and tourism. They thus generally celebrate the idea of China’s Silicon Valley, but they, too, have concerns.

"I think it is essential for a modern and powerful country to have a high-tech hub and we are so excited that we finally own one,” says Stark Chan, founder and CEO of BULL.B Technologies, which develops apps and software solutions for some of Hong Kong’s biggest brands.

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Credit: Reuters / TPG
Wang Wei (R), Chairman of SF Holdings and founder of SF Express, chats with Tencent Holdings Chairman and CEO Pony Ma during the Guangdong-Hong Kong-Macao Greater Bay Area Forum in Hong Kong, China June 20, 2017.

Chan is also excited about access to an extended market, but he fears China’s high-tech industries have far more to gain from easier access to Hong Kong and its proven international connections than companies like his will gain from easier access to China. And he says there are few incentives in place to take the risk.

“Yes, it’s true that there is enormous market demand in China, but it seems that support from both China and Hong Kong governments is of little help,” says Chan. He also points to what he calls “cultural differences,” noting that even setting up a domain name in China is far more complex than it is in Hong Kong.

This presents a raft of difficulties regarding the so-called ‘technology ecosystem’ in Hong Kong, which is very much more international than that of China. Let’s not forget that anyone who steps a few meters over the border from Hong Kong into neighboring Shenzhen will suddenly find that access to their favorite online media platforms like Facebook, Google, Twitter and Gmail will suddenly terminate. The Great Firewall of China is hardly conducive to the unrestricted sharing of ideas, requisite for an international technology and innovation powerhouse.

“To be the Silicon Valley of Asia,” says Wong, “you cannot just work within China.”

Tech education entrepreneurs like John Huen, founder and CEO of Koding Kingdom, one of Hong Kong’s biggest coding and STEM academies, thinks this presents a great opportunity to educate and train the talent pool for the GBA.

John_Huen_Founder_and_CEO_of_Koding_King
Credit: Via John Huen
John Huen, founder and CEO of Koding Kingdom, wants Hong Kong to take a leading role in training talent within the GBA.

“Hong Kong could be an excellent tech education hub for the Greater Bay Area to help China’s rise as a technology giant, but in a soft way,” says Huen. He points out that the GBA has no internationally ranked universities outside Hong Kong, which is also the only GBA city that adheres to international standards at all levels of education.

Huen worries that government might be missing this golden opportunity and, in due course, the GBA may run out of talented, tech savvy and educated individuals to power it.

Wong, who worries that China’s tech insularity extends to its education system, agrees that education is key to the success of the GBA.

“Looking at the GBA supply chain the main question is do we have enough talent?” she asks. She suggests that the Hong Kong government has focused too much on investment in science parks and establishing steering committees staffed by bureaucrats.

In January, it was announced the Lok Ma Chau Loop would be developed into a ‘Hong Kong/Shenzhen Innovation and Technology Park.” Details of what will be housed there are still vague, but officials in China are keen to emphasize that, overall, progress is being made from theory to action.

"Based on the framework agreement (signed on July 1, 2018), all parties – from the government, business sector, education and research circles, to the public – are joining forces to put the words into actions to develop the Guangdong-Hong Kong-Macao Greater Bay Area," said Wang Fuqiang, an official with the China Centre for International Economic Exchanges, a government think tank, in an interview published by Xinhua.

Despite such optimism, if key obstacles are not addressed, the GBA risks remaining little more than a grand political aspiration.

Read Next: China's One Belt, One Road Is One Dimensional Compared with the Maritime Original

Editor: David Green (@DavidPeterGreen)

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