China’s upstart Bay Area could surpass the US original if Hong Kong, Shenzhen and Guangzhou work together
- Winston Mok says the Pearl River Delta is not yet on a par with California’s Bay Area or the Boston-Washington corridor, but the infrastructure connecting the Chinese region’s cities could boost its competitiveness significantly
Even as the Democrats take over the House, the US map of Congressional seats looks mostly red. Blue pockets are concentrated on the US’ West Coast and the Northeast. But it is not geographic size that counts. California and the Boston-Washington corridor represent just 6 per cent of US land area. Yet California alone is the fifth-largest economy in the world. Together with the US’ Northeast, it would make the world’s third-largest economic entity.
If these two regions were to be splintered from the US, a politically polarised and fractured nation, its economy would be one-third smaller. More importantly, the US would lose its most affluent, influential and innovative regions. What would be left of the US, still larger than China’s economy today, would be a second-rate nation.
Likewise, without the Yangtze River Delta and the Pearl River Delta, China would lose much of its economic dynamism. China’s top two economic regions are collectively about the size of the German economy, the world’s fourth-largest, and are poised to surpass Japan’s economy, the world’s third-largest, before 2025. China’s rejuvenation would be much more difficult without the Yangtze River Delta, which was the world’s top economic region for most of the past millennium.
Instead of national rivalry between the two great powers, real competition is among leading economic regions – clusters of world-class cities with dense economic networks.
China’s top two economic regions are comparable to the US’ top two in many ways. They both represent about a third of their national economies. They are centres of innovation and commerce. In a globalised world with rapid technological changes, these mega regions only grow in importance, defining the competitiveness of their nations.
If China’s economy is poised to overtake the US’ sometime in the next decade, that is largely due to China’s large population base. The true measure of China truly becoming the US’ equal is not national gross domestic product but regional competitiveness.
Today, the world’s most competitive economic regions are in the US. Three of the world’s top 10 companies by market capitalisation are in the San Francisco-San Jose area. China will truly arrive when the Yangtze River Delta and the Pearl River Delta become just as competitive. That is quite a way away – long after China exceeds the US in total economic scale.
In a recent ranking of the world’s most competitive cities, led by New York and Los Angeles, eight of the top 20 are in the US. Among them, three are in California and two in the Northeast.
China has five cities in the global top 20. Other than Shenzhen, which is ranked fifth globally, none of the other four are in the top 10. Three of them – Shenzhen, Hong Kong and Guangzhou – anchor the Pearl River Delta.
To climb further up the ladder, China’s top regions will face tough challenges.
The world’s most connected cities, London and New York, got there over a very long period. They are financial and information centres.
Isolated from the global financial system and internet network, Chinese cities – other than Hong Kong – face constraints on their global connectedness.
In the digital economy, human capital is the most important resource. This is an area dominated by US cities. No Chinese city is among the global top 10. Despite Beijing’s best efforts to produce and attract world-class talent, it is hard to see how the gap with the US may be closed.
American and European cities, while having slower economic growth, are much more sustainable in their competitiveness.
Among the global top 20 in sustainable competitiveness, there is also one Chinese city – Hong Kong (ranked sixth). Shenzhen is 48th. The Pearl River Delta’s sustainable competitiveness trailed its counterparts in the US and Japan.
Europe and the US lead the world in innovation. In Asia, the most innovative nations are Singapore, Japan and Korea. At a more micro level, however, Shenzhen-Hong Kong is recognised as the world’s number two science and technology cluster, behind only Greater Tokyo and ahead of Greater Seoul (third) and Silicon Valley (fourth). But China’s top two regions have only two such technology clusters between them (one each) while the two US counterparts collectively have six (three each).
In the US, these technology hubs within the same region are geographically dispersed – you need to fly from San Francisco to Los Angeles, from Boston to New York. In contrast, the Pearl River Delta is unique – a mega region which is at the same time a metro area. Distance is compressed by high-speed train and a mega bridge. Such infrastructure connects three mega cities and nearby urban areas into a single metropolitan area of close to 70 million people. Such unparalleled concentration of economic activities facilitates growth and innovation.
Herein lies China’s hope to ascend in the global league table of top economic regions. Each Chinese city alone is no match for New York. But the Pearl River Delta – through its connected infrastructure – is China’s New York, San Jose and Los Angeles combined. This combination can unleash its full power if each city plays to its complementary strengths in concert with its counterparts.
It is perhaps no accident that Hong Kong is an integral part of one of China’s most competitive regions. Four decades ago, Hong Kong played an instrumental role in ushering China onto the world stage. Hong Kong’s openness, international connections, capital market and legal institutions make it indispensable to China’s past and future rise.
A key measure of when China will truly “arrive” is when the regional economy of the Pearl River Delta – or Greater Bay Area as it is now branded – is as competitive as its world-leading scale of close to 70 million people. Thus, in China's path to take centre stage, Hong Kong continues to have a strategic role to play.
Winston Mok, a private investor, was previously a private equity investor