Fri, Feb 22, 2019 - Page 9 News List

China’s megalopolis plan skirts tough questions

Beijing’s plan to create a ‘Greater Bay Area’ aimed at rivaling Silicon Valley is expansive, but short on details of how it is going to integrate the region’s differing legal, customs and tax systems

By David Tweed, Yinan Zhao and Edwin Chan  /  Bloomberg

Illustration: Mountain People

China’s long-awaited plan to create a high-tech megalopolis on its southern coastline rivaling California’s Silicon Valley generated optimism among Hong Kong’s business community even as key details remain unclear.

The blueprint for the Greater Bay Area linking China’s southern coastal cities with Hong Kong and Macau, a signature policy of Chinese President Xi Jinping (習近平) first articulated in 2017, boosted stocks after it was published late on Monday.

It said the government would turn the area into a leading global innovation hub, boost infrastructure connectivity and strengthen Hong Kong’s role as an international center of finance, shipping, trade and the offshore yuan business.

Yet several thorny issues were left out of the plan, including complex questions about which customs, tax and legal systems would predominate.

In Hong Kong, the concept of the Greater Bay Area has led to worries that further integration will erode the “one country, two systems” framework that allows the territory to maintain separate legal, monetary and political systems from China.

“It is a generic, wide guide on what’ll be encouraged and what’ll be promoted, but it doesn’t have a clear explanation on detailed measures,” said Serena Zhou, desk economist at Mizuho Securities Asia in Hong Kong. “The biggest challenge for the Greater Bay Area is how to unify a tax system, as tax policy is an important matter in talent flow.”

If all goes as planned, the economic benefits could be substantial: HSBC Holdings says the move to knit Hong Kong, Macau, Shenzhen and Guangzhou together could boost a trillion-US dollar economy that exports more than Japan.

The announcement drove stocks in the region higher, with Guangzhou Port, Zhuhai Port and Shenzhen Yan Tian Port all climbing by the 10 percent daily limit.

Still, China’s major tech companies based in Shenzhen, which borders Hong Kong, have not made the Greater Bay Area central to their future growth plans.

Shenzhen has become an Asian tech mecca home to giants such as Tencent Holdings and Huawei Technologies Co largely due to its hyper-competitive industry culture, and neither Hong Kong nor Macau is known as a wellspring of global tech talent.

Tencent cofounder Pony Ma (馬化騰) couched the plan in political terms in 2017 when his company organized a summit specifically to spur debate on the topic during the 20th anniversary of Hong Kong’s handover to China from Britain.

“Our Greater Bay Area is different in one big way from other Bay Areas: we have one country, two systems,” Ma told hundreds of people including government officials, academics and investors. “We have more than 100 years of segregation and now we are entwining.”

The plan released on Monday emphasized the importance of maintaining the “one country, two systems” frameworks meant to ensure a high degree of autonomy for Hong Kong and Macau, but it also identified diverging social, customs and legal systems as a challenge to the Greater Bay Area’s success, without providing details on how they would be integrated.

“Economically a kind of blurring of the boundaries of ‘one country, two systems’ is inevitable,” said Sonny Lo, (盧兆興) a political science professor at the University of Hong Kong, who has authored books on the territory’s relationship with Beijing. “But given the fact that Hong Kong and Macau have legal and political differences with China, ‘one country, two systems’ will be retained.”

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