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Asia Pacific

Down by the GBA

Ivy Au Yeung Chief Executive Officer ANZ Hong Kong

2018-07-17 08:08

When we think about China and its remarkable economic expansion we often think of signature achievements like the bullet-train network or, on a much grander scale, the evolving Belt and Road Initiative.

There’s one area of China’s economic expansion easily missed however, maybe because it is too obvious - the amazing expansion of the Greater Bay Area in south-east China.

"There’s one area of China’s economic expansion easily missed however, maybe because it is too obvious”

Integrated with Hong Kong and Macau, the Greater Bay Area also includes nine Guangdong cities. The area’s total population is about 69.6 million, representing 5 per cent of total population in China. Its gross domestic product is RMB10.2 trillion, 11.6 per cent of China’s total GDP.

To add perspective, the total GDP in the Greater Bay Area is higher than Australia and is about the same as Canada.

Total economic clout aside, the Greater Bay Area is also quite diverse and the 11 cities have their own core features. Guangzhou has the largest population, Shenzhen the highest employment figures, Hong Kong’s GDP is highly concentrated in tertiary industry while the GDP of both Foshan and Huizhou are mostly secondary industry. Macau has the highest GDP.

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This complementarity of city profiles means it makes sense for them to coordinate and develop a city cluster instead of competing with each other.

By leveraging each city’s strengths and advantages the GBA would be able to grow as a strong economy with the largest population and land area, comparable to other major Bay Areas in the world like the San Francisco bay area, New York bay area and the Tokyo bay area.

Cities of the bay, globally

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Because of the combined strength of such a cluster ANZ expects to see higher flows of people, information, capital, knowledge and technology between the cities.

Moreover we expect a government policy framework which will give more details on how to facilitate these cross-border movements.

Let’s consider what will emerge in more detail.

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Opportunities for sectors in Greater Bay Area

  • Financial sector
    • As an international financial centre Hong Kong has developed sophisticated financial infrastructure and systems which could facilitate the Greater Bay Area’s integration into the global financial market.
    • Hong Kong can continue to support China’s capital account liberalisation and RMB internationalisation.
  • Property sector
    • There is limited land supply in Hong Kong which has driven up property prices in the city significantly, making it one of the most expensive cities for real estate in the world.
    • With the completion of Hong Kong-Zhuhai-Macau Bridge and Express Rail Link in sight Hong Kong’s connectivity with the Greater Bay Area will be enhanced, creating access to more land resources within a one-hour commute zone.
  • Technology sector
    • Shenzhen is now the headquarters of several high-tech and internet companies and is widely regarded as the “Silicon Valley” of China.
    • High-tech exports have started to dominate Shenzhen’s exports.
    • This fast-growing technological innovation lifts demand for high-tech talent. The resulting hiring boom lifts salaries which drives talent to acquire the skills and move to the city to get the high-paying job.
    • Hong Kong provides a great source of talent with higher education qualifications. With the shrinking salary gap between Hong Kong and Shenzhen, as well as the shorter commute time between the cities, talent will be more willing to consider taking up positions across the border.
  • Logistics sector
    • According to China's State Post Bureau, 40 billion parcels were delivered in the country in 2017 -- up 28 per cent from the year before. The figure has increased 33 times just in the last decade thanks to the rise of e-commerce titans like Alibaba Group Holding and JD.com.
    • With a rapid expansion of online retailers and ecommerce in China and the growth of the middle-income population in the Greater Bay Area, there is strong support for growth in logistics companies in the area.
    • Hong Kong, in particular, with a well-established world class container port, international airport and infrastructure, will further strengthen its position as the logistics centre.
  • Customer insights:
    • The Guangzhou-Shenzhen-Hong Kong Express Rail Link will connect Hong Kong with the broader high-speed rail network of China, improving labour mobility.
    • The Hong Kong-Zhuhai-Macau Bridge will complete the missing link between the eastern and western cities within the Greater Bay Area to form a strategic tourism hub, generating a higher flow of people and trade between the three locations.
    • The infrastructure will reduce the journey times between cities and ensure a more efficient flow of people, goods and services.
    • The enhanced transport links and connectivity between Hong Kong, Macau and nine cities in Guangdong has the potential to relieve Hong Kong of some of its land shortage problems.
    • Corporations will have the opportunity to expand their office operations in the leading cities, alleviating the low vacancy and supply pressure in Hong Kong’s office market.
    • In the short- to medium-term, property supply in certain parts of the Greater Bay Area has the potential to grow however the rapidly improving transportation network in the area will likely lift prices, closing the gap of housing prices between the cities.

Looking ahead - Milestones to be aware

The massive opportunity presented by the Greater Bay Area is already visible but the area was only formally put into the Government Work Report in 2017. More details will be announced in the near future.

We can already see the growth in development but the next major milestone – and, literally, bridge to faster growth – will be the completion of key infrastructure such as Zhuhai-Hong Kong-Macao Bridge and Express Rail Link.

That enhanced connectivity will induce even more cooperation among the 11 cities and we believe multiply rates of growth.

Ivy Au Yeung is Chief Executive Officer at ANZ Hong Kong

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

anzcomau:Bluenotes/asia-pacific-region,anzcomau:Bluenotes/global-economy
Down by the GBA
Ivy Au Yeung
Chief Executive Officer ANZ Hong Kong
2018-07-17
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