The Pearl River Delta made Hong Kong richer 40 years ago – the Greater Bay Area is a chance to repeat history
- Victor Fung says Hong Kong should analyse how integration under the Greater Bay Area can lift its economy, much as interaction with the Pearl River Delta gave it a boost 40 years ago
If past is prologue, then Hong Kong’s economic take-off after China officially established its special economic zones in the Pearl River Delta 40 years ago this summer points to a future of expanding economic horizons for our city within the Greater Bay Area.
New physical infrastructure and trade facilitation measures are in place to help drive this next cross-border transformation, which promises larger commercial flows, lower costs, higher efficiencies and greater prosperity for Hong Kong and the region.
Hong Kong has benefited tremendously from its economic interaction with the Pearl River Delta. In the 1980s and 1990s, countless small and medium-sized enterprises – the bedrock of our economy – scaled up rapidly by taking advantage of manufacturing capacity on the other side of the border. This SME miracle worked wonders for incomes, social mobility, living standards and Hong Kong’s overall stability. It also catapulted Hong Kong to the forefront of globalisation.
But the world has moved on. We have entered the era of “Industry 4.0”, which is all about digital manufacturing, the internet of things, robotics, artificial intelligence, big data, and the like. With the Greater Bay Area (which includes nine southern Guangdong province cities, plus the special administrative regions of Hong Kong and Macau), we have the unique prospect of forging a new economic alliance that will revolutionise manufacturing around the world and revitalise our related service industries.
This is a multi-generational opportunity. Leveraging it will be crucial to Hong Kong’s future competitiveness and our people’s well-being. But, first, we need to recognise the new global landscape, including our mental picture of the Pearl River Delta, which was once called “the world’s factory”.
There are game-changing realities to consider. In 1997, for example, Hong Kong’s GDP was three times that of the Pearl River Delta; now it is one-third the size. The Greater Bay Area, with its mix of hi-tech manufacturing capacity and financial and other high-end services, is a uniquely diversified economy with a GDP of US$1.51 trillion, approaching that of the South Korean economy. The Pearl River Delta is home to more than 60 million affluent and sophisticated consumers. With impressive new rail and road links, it is now possible to wake up in Hong Kong, have breakfast in Shenzhen, lunch in Guangzhou, dinner in Zhuhai and return to Hong Kong, all in the same day.
The bay area’s cities function as 11 nodes in a network where each node contributes through its own areas of specialisation and strength. For example, Shenzhen for hi-tech manufacturing, research and development; Hong Kong as a platform for overseas companies to enter the Greater Bay Area market and for mainland companies to internationalise, as well as a centre for international finance, trade and investment, plus marketing and sales.
The keys to this network’s success are the complementary differences between individual nodes. Hong Kong can thus help the whole network, and itself, by enhancing its distinctive role as the region’s most international city, backed by our rule of law, free flows of information and capital, plus other significant underpinnings of “one country, two systems”.
This approach is fully reflected in the most recent Closer Economic Partnership Agreement (Cepa) between the mainland and Hong Kong. Effective since January 1, it preserves Hong Kong’s separate customs status while making it easier to do business across bay area borders. Equally heartening, especially for proponents of multilateralism, is that the newest arrangement embeds the WTO’s 2017 Agreement on Trade Facilitation, negotiated in Bali in 2013. Under this breakthrough framework, customs procedures, business regulations and product standards are streamlined and harmonised – but each jurisdiction enforces them under their own authority.
While such progress is encouraging, creating the Greater Bay Area of the future is a more complex and collaborative undertaking than participating in the Pearl River Delta’s opening 40 years ago, hence there is a need for in-depth analysis from a business standpoint. With this in mind, a group of leading Hong Kong firms commissioned an independent study in May last year. Conducted under the auspices of the 2022 Foundation, the study is nearing completion. In addition to sharpening our own businesses’ bay area strategies, we shall make the findings public.
Clearly, a number of obstacles could delay or hinder the region’s ability to reach its full potential through greater economic interaction. Many of these are the natural result of working with 11 cities, three provincial-level jurisdictions, three customs zones and three WTO members. Constant policy innovation involving all “nodes” will be needed to achieve freer flows across bay area borders boundaries while taking full advantage of “one country, two systems”.
On a practical level, our study will show that there is a need to enhance business-to-business cooperation within the region, establish bay area institutions and organisations, create regional development initiatives and increase understanding of the region among all 70 million inhabitants. We will offer specific proposals for these and other ideas.
A generation ago, young and agile Hong Kong entrepreneurs seized the moment when the Pearl River Delta opened for business. Now, an even bigger opportunity is unfolding that has the potential to lift up lives and prospects for future generations across the Greater Bay Area.
Dr Victor K. Fung is chairman of the 2022 Foundation, and was chairman of the Greater Pearl River Delta Business Council between 2004 and 2013