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.
Illustration: Mountain People
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.”
A futuristic new terminus linking Hong Kong with China’s 24,945km high-speed rail network faced resistance last year, with democracy activists arguing that a border crossing in the building would undermine a constitutional ban on Chinese law enforcement officers operating in the territory.
Hong Kong passed the enabling legislation in June last year, but only after China’s National People’s Congress stepped in to ratify the plan.
China has already spent billions of dollars on infrastructure projects linking the cities, and the plan now envisages a strategy for the region that stretches to 2035.
Xi last year inaugurated a US$15 billion, 55km bridge, the world’s longest sea crossing, linking Hong Kong with Macau and Zhuhai.
A comprehensive blueprint can “add new impetus into the development of Hong Kong and Macau” and help build a “world-class cluster of cities,” it said.
“In some ways the concept of the Greater Bay Area is a manifestation of things that have already been happening in terms of economic connectivity,” said Tim Summers, whose book China’s Regions in an Era of Globalization, was published last year. “The plan gives the development of the region more strategic importance within the Chinese system.”
Under the blueprint, the major cities and territories of the Greater Bay Area will establish themselves as hubs for different sectors.
Hong Kong will focus on international finance, navigation and trade, while Macau will focus on international tourism and becoming a platform for trade with Portuguese-speaking countries such as Brazil. Guangzhou will take a role as an administrative hub while Shenzhen — home to Huawei — will expand its role as a special economic zone and tech hub.
Enshrined within the sprawling policy is a clear intention to recreate the phenomenon that transformed the greater US Bay Area over several decades into the cradle of global technology innovation.
The plan talks about building an international tech innovation center: a “global high-tech and technological innovation haven” and a “wellspring of new industry” in its own words.
The strategy aims to:
■ Encourage sharing and cooperation in scientific and technological research between universities, institutions and enterprises around the region;
■ Support the establishment of research and development (R&D) centers: five major areas of focus are logistics, textiles, communications technology; automotive components; nano materials;
■ Build several tech incubators in nine Pearl River Delta cities;
■ Strengthen protection for intellectual property (IP) rights, including a mechanism for handling cross-border intellectual property cases; and
■ Build “next-generation” Internet infrastructure, including a digital home and smart city network.
The government will also support Hong Kong and Macau banks and insurers in setting up units in some cities, including Shenzhen and Guangzhou, according to the document. China is to study setting up a yuan-denominated securities market in Macau.
Here are some other details of the plan:
■ Hong Kong will set up a financing and investment platform for the Belt and Road Initiative;
■ Guangzhou will build a regional trading center for private equity, property rights and commodities; a futures exchange with carbon emissions as the first product;
■ China, Hong Kong and Macau insurance institutions will receive support to develop a cross-border yuan reinsurance business;
■ Hong Kong Exchanges & Clearing Ltd was singled out in the plan in relation to official assistance to ongoing efforts to develop a spot commodities trading platform in southern China;
■ The government will support Macau in becoming a yuan clearing center for Portuguese-speaking nations;
■ Enterprises in the Greater Bay Area can issue cross-border yuan-denominated bonds;
■ Cross-border use of the yuan will be encouraged, and cross-border investment by residents and financial institutions will be expanded to include more financial products;
■ The government will encourage sharing and cooperation in scientific and technological research between universities, institutions and enterprises around the region;
■ Support the establishment of R&D centers: five major areas of focus are logistics, textiles, communications technology; automotive components; nano materials;
■ Build several tech incubators in nine Pearl River Delta cities;
■ Strengthen protection for intellectual property, including a mechanism for handling cross-border IP cases; and
■ Build “next-generation” Internet infrastructure, including a digital home and smart city network.
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