Last year, China laid out a big, visionary plan to drive economic growth and social development to one “bay” area…
The Greater Bay Area (GBA) initiative includes nine cities in Guangdong Province immediately to the north of Hong Kong, plus Hong Kong and Macau.
The GBA is meant to evoke images of other dynamic, successful bay areas… such as San Francisco, Tokyo and New York. This initiative is meant to drive economic growth and social development through a series of practical steps and processes that will help stimulate business, investment, social development and tourism in what is already a hugely dynamic region.
I was initially sceptical of this big, grandiose plan. But I recently attended a big seminar event on the GBA by Hong Kong’s chief executive as well as other leaders in business and policy in this area.
And now, I’m more convinced than ever that it’ll happen.
What is the Greater Bay Area?
The GBA is already huge. It embraces some 66 million people – more than the entire population of the U.K. The region currently has a combined GDP of roughly US$1.4 trillion, representing around 12 percent of China’s total GDP, a GDP roughly equivalent to that of Australia. It is also the most international region of China.
It contains one of the largest ports in the world… It is the world’s largest agglomeration industrial development and manufacturing output… And it ranks in the top league of global financial centres.
Macau is also the largest gambling centre in the world, many multiples ahead of Las Vegas, the next largest. And the area is a globally important technology centre, both in terms of research and development and production of technology-led products and services.
So why is there a need for a government driven initiative to boost the region’s economic and social development? It is already immensely successful.
The GBA straddles three international borders. Yes, Macau and Hong Kong are technically Special Autonomous Regions of China, but they operate functionally as three separate countries. There are more restrictions on flows of people, goods, services and capital between these three “nations” than there are between the 27 countries in the European Union or between the 50 states of America.
These three “countries” have different legal systems, different currencies and different rules and regulations on everything from tax to transport to accounting to health care, pensions, education and data and information. They also have different customs regulations, environmental rules and municipal services. And even within China, there can be different rules and practices between cities in this sub region. These differing conditions act as barriers to development of the region.
Put bluntly, there is a lot of friction in the system between these three jurisdictions. These frictions add to the physical difficulties of doing business and liaising across the borders, as well as the cost. They also limit the ability to “do stuff”.
The GBA initiative is aimed at reducing these frictions, easing the restrictions, cutting costs and making the free flow of capital, labour, people, ideas, services, data and information easier and cheaper. It is intended to propel the region to even greater heights both economically and socially.
The GBA green light
Now, this might sound like an impossible dream. But this is going to happen.
Why do I say that?
There are three reasons why I firmly believe that this initiative has legs, and will provide increased growth and business prospects for many companies focused on projects in this zone.
First, at recent high-level events, President Xi Jinping has openly endorsed the GBA initiative. When the big boss gives his blessing to a proposal like this, it gets a lot of attention from the party high-ups. What Xi says, goes.
Second, adding even further credibility, Xi has formally linked this initiative to the One Belt One Road project (OBOR). As we’ve shown in the Asia Wealth Investment Daily, this initiative is happening in a big way with a huge commitment of financial resources and talent. Being formally part of OBOR gives the GBA initiative an even greater push from the top.
Third, the National Development and Reform Commission (NDRC) has been charged with implementing the initiative. The NDRC is one of the highest-level government agencies in the land. I fully expect the NDRC to soon – if it hasn’t already – form an internal ministry or bureau that will implement the necessary regulations and on the ground actions needed to execute the program. It will probably form some kind of legal entity that will bring senior officials from all of these cities together into a joint body to set priorities for action and prepare the details for execution.
Given what we have seen coming from the top, I am extremely positive about the impacts of the Greater Bay Area initiative. And we’ll see companies involved in the project – like property developers – profit in the months and years ahead.