How the greater bay areas of China and the US can pave the way for trade cooperation

Patrick Ho says the world’s two biggest economies must find common ground to move beyond their recent trade disputes. Why not look towards economic clusters like the Greater Bay Area of Guangdong, Hong Kong and Macau to lead the way?

US-China relations

Patrick Ho

Published: 1:00pm, 15 Oct 2017

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To resolve their trade issues, China and the US could think beyond the geopolitical paradigm of a nation state. They could, for instance, each set up special zones for cooperation within each other’s borders. Illustration: Craig Stephens

US President Donald Trump will make his first trip to Asia that will also include a state visit to China in early November, a time when the 19th Communist Party congress will have ended and Chinese President Xi Jinping can devote more effort to Sino-US relations.

Trump may also need some diplomatic breakthroughs to divert public attention at home from his domestic stalemates and rally support for his leadership. Therefore, it is widely expected that the meeting will be focused and productive, perhaps generating more fruitful results than the Xi-Trump summit at Mar-a-Lago half a year ago.

Among the spectrum of common concerns, North Korea and trade will no doubt be the most challenging issues on the table. There are high hopes that some progress can be made, as it would help strengthen the momentum for bilateral cooperation and mutual trust. However, it is unrealistic to expect these chronic issues to be solved overnight.

To ensure the summit’s success, the agenda is likely to also include issues that have feasible solutions. Over the past eight years, Beijing and Washington have zeroed in on climate change as a shared concern. Nevertheless, with climate change losing its priority on the White House’s agenda, China and the US need to look for new common ground.

Five trade issues the US and China need to tackle before Trump goes to Beijing

US House Speaker Paul Ryan, a Republican from Wisconsin, speaks during a news conference following a tour of the Harley-Davidson facility in Menomonee Falls, Wisconsin, on September 18. The US has to “get moving” on bilateral trade agreements to open markets and reduce tariffs for companies like Harley-Davidson trying to get access to Asian consumers, said Ryan. Photo: Bloomberg

Trump’s “America First” rhetoric emphasises the revitalisation of the American economy and employment, to renew infrastructure to help US enterprises expand overseas, including getting a larger share in the huge Chinese market. At the same time, it will be in both Beijing’s and the world’s interest to further integrate the regional development network and establish a common market. Xi’s “Belt and Road Initiative” is such an effort.

The Greater Bay Area is the fastest-growing city cluster in China. It has the potential to become a pioneer in a China-US cooperation project

It seems that the belt and road and “America First” are two different concepts in terms of geography and principles. The former aims to transform interchanges across Eurasia and Africa, while the latter focuses on matters on American soil. The former emphasises the principle of achieving shared growth through discussion and collaboration, while the latter focuses on maximising US national interest.

However, both concepts have at least one thing in common: development. If we can find some projects that combine these two concerns, there will be new common ground for the two countries, which can become the new bedrock of China-US relations.

Recently, China-US trade imbalances have been a thorny issue. Trump has authorised an inquiry into China’s alleged theft of intellectual property. Moreover, he has been critical of China for supposedly stealing American jobs, and setting up barriers preventing US companies from entering the Chinese market.

Experts have pointed out that the trade dispute is actually one of many problems arising from division of labour in a globalised world. It is not designed to undermine American interest.

It would be mutually beneficial if the two countries can reach a consensus on bilateral trade and deepen cooperation.

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President Donald Trump gestures as he and President Xi Jinping walk together at Mar-a-Lago in Palm Beach, Florida, in April this year. At their summit, the presidents agreed to a 100-day action plan on trade. Photo: AP

At the Xi-Trump summit in Florida, the presidents agreed to a 100-day action plan on trade. Both countries are reportedly interested in turning the ad hoc plan into a permanent mechanism for solving trade disputes. But the real problem is, as the two largest economies in the world, every minor change in trade policy for one might generate unpredictable effects and risks for the other. Governments are unlikely to make any concessions without a careful assessment of the effects.

There may be some lessons we can take from Chinese leader Deng Xiaoping. To implement the reform and opening-up policy, four special economic zones, including in Shenzhen and Zhuhai, were set up around 1980. Deng gave the zones special policies and flexible measures to attract foreign and domestic firms. These policies also acted as a firewall, preventing risks and repercussions, when they did arise, from spreading across the entire country.

It proved a great success; the reform experiences of these economic zones have been gradually extended to all parts of the country.

A vehicle sits in an acoustics testing lab at the BYD headquarters in Shenzhen, on September 21. To implement the reform and opening-up policy, four special economic zones, including in Shenzhen, were set up around 1980. The idea proved a success. Photo: Bloomberg

When addressing China-US trade disputes, we should think out of the box. Instead of working within the geopolitical paradigm of a nation state, could we not adopt the geo-economic model on a regional level? For instance, China and the US could each set up special zones for cooperation within each other’s borders. Each zone would have more autonomy and flexibility in deciding their economic policy, domestic regulations, information circulation, enterprise registration and banking services, and reaching trade and economic agreements with other zones. Bilateral ties could be customised to suit both parties. At the same time, any risk could be confined to these areas.

For such a pilot programme, there are no better places than the “big bay areas”, that is, the highly developed city clusters with sophisticated division of labour representing complete industrial chains, and synergistic economic benefits. There are three well-recognised “big bay areas” in the world, the Tokyo Bay Area, the New York Bay Area and the San Francisco Bay Area. The southern China bay area, encompassing Guangdong, Macau and Hong Kong, is a fourth.

Can China’s ‘Greater Bay Area’ match its New York and San Francisco counterparts? Much will depend on Beijing

The San Francisco Bay Area includes not just San Francisco, which is the political and financial centre, but also Oakland, an industrial base; San José and Silicon Valley, which are home to many of the world’s largest hi-tech corporations; and the North Bay, a beautiful area extending into the state’s wine country. Then look at the New York Bay Area on the East Coast. Manhattan is a global financial centre, while its neighbours Queens and Brooklyn are well known for their manufacturing and printing industry.

In China, the Guangdong-Hong Kong-Macau Greater Bay Area, which consists of nine cities in Guangdong, including two special economic zones, and the two special administrative regions of Hong Kong and Macau, is among the leaders in China in terms of administrative flexibility and economic competitiveness.

Guangdong, a pioneer for reform and opening up, has a long history of foreign investment. It is also one of the starting points of the new Maritime Silk Road.

Visitors enjoy the sunset and a panoramic view of Hong Kong from the International Commerce Centre in West Kowloon. Each city in the southern China greater bay area has its own strengths and they complement one another. As an international financial hub, Hong Kong plays a key role. Photo: EPA-EFE

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More importantly, each city has its own strengths and they complement one another. Hong Kong is an international financial hub. Macau has many world-class hotels and leisure facilities. Guangzhou is the political and cultural centre in southern China. Shenzhen is famous for its hi-tech industries. And all these cities are linked by a modern road and rail network to create a collection of communities that are accessible within an hour of each other.

In other words, the Greater Bay Area is the fastest-growing city cluster in China. It has the potential to become a pioneer in a China-US regional cooperation project.

The great delusion that is the Greater Bay Area project holds nothing for Hong Kong

During his first visit to China, US Secretary of State Rex Tillerson said “the US-China relationship has been guided by an understanding of non-conflict, non-confrontation, mutual respect, and win-win cooperation”. Tillerson was the first US secretary of state who openly reaffirmed President Xi’s proposal of a “new type of major power relations”. He also acknowledged the importance of working on a long-term commitment to chart the course of the development of US-China relations.

Tillerson was right. It is time to relinquish the zero-sum game mentality and work on farsighted and mutually beneficial strategic projects. A China-US big bay area cooperation plan will be a very good place to start.

Dr Patrick Ho Chi-ping is deputy chairman and secretary general of the China Energy Fund Committee

This article appeared in the South China Morning Post print edition as: Areas of cooperation

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