Hong Kong a place to start for businesses looking to dip their toes into China’s Greater Bay Area
The city’s developed legal and financial systems offer a familiar environment from which foreign business and entrepreneurs can explore the potential of China’s grand regional development idea
With a potential market of some 68 million people and a gross domestic product that could triple by 2030 to some US$4.6 trillion, China’s “Greater Bay Area” economic development plan for the country’s south promises big opportunities for businesses and entrepreneurs looking to take the plunge into the China market.
But the plan to link 11 cities is still in its infancy and lacks the specific details that investors would wish to see before committing their cash. One big selling point, however, could be the inclusion in the plan of Hong Kong, where the global financial expertise, English-speaking base and developed legal system offer a familiar environment for foreign businesses to explore the plan’s potential.
Bangladesh-born entrepreneur Mahmudul Hasan is one who has taken that route for his health care start-up MVision, which uses artificial intelligence to speed up radiotherapy treatment for cancer patients.
He has set up the company in Hong Kong, a city he called “welcoming”, and sees the region just across the border as both a big market and a source of innovation and expertise
“We are looking to further expand the software to hospitals across mainland China, starting with the Greater Bay Area due to its proximity to Hong Kong and its highly developed infrastructure,” he said.
“Shenzhen would be very attractive place to set up an R&D office. There are lots of trained AI engineers in that region,” he said, referring to the city in Guangdong province – around which the bay area plan is centred – that has become global a hi-tech development and manufacturing hub.
A blueprint for the bay area has been completed and is still awaiting top-level approval, according to comments made by He Lifeng, head of the National Development and Reform Commission, China’s top economic planning body, at the annual meeting of the government in March. Some reports have said full details could be released as early as this month.
The Greater Bay Area is a region roughly the size of Germany, with a US$1.3 trillion economy, and is already home to Chinese internet giant Tencent and to Huawei, the world’s largest telecoms equipment manufacturer. The development plans envisages multimillion-dollar infrastructure investments – including a bridge nearing completion that will link Hong Kong and Macau with the bay area city of Zhuhai – as well as policies and regulations to help the free flow of goods and services.
A think tank, the China Centre for International Economic Exchanges, has predicted that the Greater Bay Area’s GDP will grow to US$4.6 trillion by 2030, surpassing rival bay areas in Tokyo, New York and San Francisco to make it the world’s biggest in terms of economic scale.
Hong Kong offers foreign businesses looking at that potential a good place to start in a business and legal environment that is familiar to them, analysts said.
“Setting up operations in Hong Kong may be a good strategy to reduce risk, while at the same time being in close proximity to the bay area,” said Christer Ljungwall, vice-president and head of research at ENC International Advisory, a consultancy working with Chinese and western businesses.
“This would allow investors to observe, learn and evaluate how to proceed. As the bay area becomes increasingly dynamic and integrated in terms of logistics, governance, legal performance, finance, etc, the region will also attract more foreign companies,” he said.
To be sure, the bay area is not the only option for foreign businesses looking to benefit from China’s growth. A number of cities and regions are on the same quest to attract start-ups and build a culture of innovation – the central government has launched over 1,600 hi-tech incubators across the country.
The capital Beijing, for example, has recently announced 1 million yuan (US$158,000) in cash incentives and fast-tracked visas to attract foreign talent to its Zhongguancun tech hub, while Shanghai plans to nurture 200,000 technology entrepreneurs by 2020 and the western city of Chengdu has poured money into luring overseas start-ups, including up to 1 million yuan in capital and specialist visa categories for entrepreneurs.
The southern tropical island of Hainan has also joined the fray, offering subsidised housing and fast track work visas as part of an ambitious campaign to attract 1 million new residents by 2025 to fuel its new status as a free-trade zone.
While the bay area has its merits, Ljungwall also noted that there are risks it may develop too fast and could become a bubble.
“There is a lot of development, government money and subsidies, a lot of easy access to capital, and companies grow from nothing to unicorns in half a year’s time. You also see a lot of similar products and services coming out,” he said.
“It’s a very dynamic area and situation but there are some ‘childhood diseases’ as part of it,” he said. “So I do believe that suddenly you have a lot of overvalued companies … everything cannot expand by 20 to 25 per cent every year.”