Hong Kong risks being left behind as the Greater Bay Area powers on

The 2019 unrest and pandemic years have delayed Hong Kong’s integration, diminished its importance and left much of its part in the bay area development plan unfulfilled
Time to dust off the plan and use it – or Hong Kong, already superseded by Shenzhen and Guangdong, will never fully capture the advantages of this fast-developing market

David Dodwell

Published: 7:30pm, 8 Dec 2023

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Nearly five years ago, the central government outlined a development plan for the Greater Bay Area. However, even though Hong Kong’s economy has much to gain from closer connectivity with the other bay area cities, its integration – and the benefits we hoped would arise – has been disappointingly slow. In the meantime, Hong Kong’s importance in the area has declined.

Much can be blamed on wholly unforeseen developments. The pandemic lockdowns hit the Hong Kong and mainland Chinese economies more severely than almost anywhere in the world. While borders were closed for nearly three years from March 2020, Greater Bay Area integration was never likely to be anyone’s priority.

The six months of street conflict in the second half of 2019, including violent outbreaks of anti-mainland sentiment, was also not conducive to shaping detailed plans for stronger cross-boundary interconnection – or even opening discussions on the subject.

Chief Executive John Lee Ka-chiu’s administration and his mainland counterparts have worked hard to repair the damage. But this work is not yet complete, and there are still parts of the Hong Kong community with no enthusiasm for closer links – no matter how clear the benefits to our economy.

Compare the state of the region with the picture painted in the reports published when the Outline Development Plan and the 2022 Foundation’s 221-page examination of the area’s future were launched, and insights emerge – some not complimentary to Hong Kong.

The Greater Bay Area economy has risen steadily in importance, growing despite the Covid-19 disruption to US$1.94 trillion last year, up 28 per cent from 2017, overtaking that of Russia and South Korea and bumping up close to Canada’s. Its population has also grown, by 17 million to reach 86.6 million.

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Also clear is the waning significance of Hong Kong and Macau. In 2017, Hong Kong accounted for 22.6 per cent of the Greater Bay Area’s gross domestic product – around London’s share of Britain’s GDP. By the end of last year, however, Hong Kong’s GDP of US$362 billion made up just 18.6 per cent of the Greater Bay Area economy.

It has been emphatically overtaken by Guangzhou and Shenzhen. Forgotten are the days, 25 years ago, when Hong Kong accounted for 20 per cent of China’s economy.

Macau’s decline is even more striking, as the pandemic halved its GDP to US$22.7 billion between 2017 and last year. Macau is today the smallest by far of all 11 municipal areas of the Greater Bay Area, a position unlikely to change even with a strong post-pandemic rebound in its casino tourism economy.

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The data is also a reminder of how the Greater Bay Area remains dominated by just five municipalities. They account for over 83 per cent of the region’s economy.

Hong Kong’s relative decline is not just illustrated in the macroeconomic data. Shenzhen, powered by global tech leaders such as Huawei Technologies, is significantly stronger as a science, technology and innovation hub. Shenzhen’s port has overtaken Hong Kong’s, and Guangzhou’s airport is as big and busy as Hong Kong’s.

While Hong Kong still makes a reasonable claim as one of the world’s leading financial hubs, it is worth remembering that Shenzhen’s stock market has more listed companies, and a bigger market capitalisation. Daily stock market turnover is often four to five times larger.

While the Outline Development Plan for the Greater Bay Area provides a powerful summary of where and how interconnection can best be driven, many of the proposed initiatives and priorities still sit in government officials’ in-trays.

There has been strong progress in cross-border financial services development, not least with the Stock Connect schemes, and joint development of regional transport. Cross-border academic connectivity has steadily developed, with Hong Kong’s leading universities boasting Greater Bay Area campuses and other collaborations.

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But other priority areas have seen scant progress. In particular, Hong Kong has been a laggard in regional cooperation on environmental initiatives, failing to move alongside the other Greater Bay Area municipalities on green power, green transport, flood control, disaster management and waste disposal. The harmonisation of access to health, welfare and elderly care services is still a work in progress.

There has also been little progress in removing the bottlenecks and barriers to the free flow of people, vehicles, goods, telecoms and even currency. This is perhaps inevitable given that Covid-related border controls were only lifted this year, but little practical progress is likely until these fundamental barriers are removed.

Noticeable too is the slow development of pan-Greater Bay Area institutions that can drive and coordinate region-wide initiatives, like the European Union has done under the leadership of the European Commission.

Until Beijing enables the development of – and provides funds for – bodies that have the power to bang local officials’ heads together, harmonise regulations and prioritise initiatives in the interests of the region, rather than of individual municipalities, progress is doomed to be slow.

As long as we remain in – but not of – the Greater Bay Area, we will never fully capture the advantages of this fast-developing market. The Outline Development Plan still provides a valuable template. We need to use it.

David Dodwell is CEO of the trade policy and international relations consultancy Strategic Access, focused on developments and challenges facing the Asia-Pacific over the past four decades