Greater Bay Area needs buy-in from banks and financial institutions
Regional success depends on services, infrastructure and personnel being in place to assist development, finance trade and help with investment
With the Hong Kong and Beijing governments putting their muscle behind the Greater Bay Area (GBA) initiative, there is every reason to believe the region can create a global economic powerhouse.
The area includes some of China’s most dynamic cities, with abundant expertise in trade, manufacturing, services, and hi-tech innovation. But if their clients are to capitalise on the opportunities, leading banks and financial institutions must ensure the requisite services, infrastructure and personnel are in place to assist development, finance trade, facilitate investment, and generally smooth the way.
“We have set up two dedicated teams in Guangdong and Hong Kong to support the business ambitions of technology companies in the Greater Bay Area,” says Diana Cesar, CEO, Hong Kong, for HSBC. “These will allow us to better support the innovation ecosystem by providing customised services and products for local start-ups and advanced manufacturing companies.”
Much of the new economic activity is expected to include a large cross-border element. The bank expects growing demand for its trade financing, payments, risk management and advisory services. An in-house “Pivot to Asia” strategy signalled a commitment to expansion across the Pearl River Delta (PRD), and sees HSBC as the only foreign bank with a presence in Guangdong’s 21 prefecture-level cities.
“Innovation and technology are policy priorities for Guangdong,” Cesar says, noting the province is home to around 33,000 hi-tech companies, a fivefold increase in the past five years. “With a universal banking platform and strong cross-border capabilities, we have become the banking partner for many leading tech companies in the region. The number of tech customers served by our commercial banking business in the PRD has more than doubled over the past three years. We believe the GBA plan to combine complementary advantages will generate tremendous opportunities for years to come.”
For Ayesha Lau, managing partner in Hong Kong for KPMG China, the prospect of a single connected market can’t fail to create more demand for banking, insurance, financing and leasing services. These may primarily be to support the manufacture and export of higher-value goods and services, but businesses across every other sector also stand to benefit.
Lau notes that a goal of the GBA initiative is to enhance the quality of life by developing smart cities and world-class infrastructure. With that will come new facilities for sports, culture, recreation and tourism, providing openings for real estate investors, fund managers and venture capitalists with an eye for sound fundamentals and steady returns.
“Successful enterprises can have access to international investors through either the Shenzhen-Hong Kong Connect scheme or a main board listing in Hong Kong,” Lau says, adding that the GBA’s emphasis on technology and innovation includes fintech. “There is a vibrant ecosystem in Shenzhen, and we expect more opportunities for collaboration between traditional financial institutions and fintech firms, as the former continue to digitise and adopt advanced technologies.”
Lau sees increased scope for firms offering asset and wealth management services. There should be new possibilities for private equity and specialist investment groups, for Hong Kong as an offshore renminbi hub, and for knock-on business falling to trust companies, legal advisers, consultants, and professional services firms.
“The rise in wealth accumulation in the GBA is leading to greater demand for more sophisticated financial services, as well as tax and structuring advice,” Lau says. “Within China, the GBA has the potential to extend its reach beyond the Pearl River Delta to nearby provinces and that the development of the area should act as a catalyst for the ‘Belt and Road Initiative’.”
Mary Huen, CEO of Standard Chartered Hong Kong, says the bank views the GBA as a strategic priority, where the flows of trade, capital and wealth have “astounding” potential. However, high-level policy coordination is needed to improve the cross-border movement of people, goods, services, investment and information.
The bank has identified seven sectors most likely to benefit in the near to medium term. They range from telecoms-related business, electronics and advanced manufacturing to e-commerce, logistics, medical equipment and pharmaceutical production.
“One of their common challenges is to move funds across the border in a quick and efficient manner,” Huen says. “Our extensive network within and outside the GBA can help meet their growth aspirations.”
In terms of commercial banking, one objective is to support medium-sized enterprises in emerging industries. On the institutional side, a clear goal is to strengthen relationships with larger Chinese corporations and help them expand overseas.
The gradual opening of the mainland’s domestic bond market to international investors will see the issuance of more “panda” bonds. In parallel, the debt markets will find more “dim sum” bonds being issued by go-ahead Chinese firms keen to tap into overseas funding.
“Standard Chartered is also well positioned to help clients set up corporate treasury centres in Hong Kong for better liquidity and risk management, financing and taxation,” Huen says. “As enterprises in the GBA ‘go global’, we expect demand for such centres to keep growing.”