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The Greater Bay Area – at the forefront of Chinese development
The increased connectivity within the GBA puts the region on track to become one of the world’s most economically influential city clusters.
The Greater Bay Area (GBA) is at the forefront of China’s economic development. It is a city cluster made up of nine cities in China’s southern Guangdong province, as well as the Hong Kong and Macao Special Administrative Regions. Accounting for just 6% of the country’s population1, it is responsible for 11% of national GDP2.
As part of China’s overall development plans, the GBA aims to deepen the cooperation between its constituent parts to deliver high-quality growth via innovation and greater connectivity. The goal is for the GBA to become a bay area of global significance to rival the San Francisco Bay Area and the Tokyo Bay Area.
Each city has its own strengths. Hong Kong, for example, is a leading international financial centre, while Shenzhen is home to world-leading technology companies. Cities like Dongguan, Foshan, and Huizhou are all important manufacturing hubs.
At the HSBC 11th Annual China Conference, held in Shenzhen in September, the opportunities in the GBA were the subject of a panel discussion between experts with on-the-ground experience of the business, financial, and policy issues affecting the area.
Increased connectivity
The growing links between the cities that make up the GBA allow the cluster to realise its full potential.
“The improved connectivity is enhanced partly by policy and partly by market forces, which means they can all contribute to the GBA community,” said Daniel Chan, Executive Vice President and Head of Greater Bay Area, HSBC.
For example, Hong Kong residents are increasingly crossing into the GBA mainland cities for leisure purposes – a trend that resulted in more than 35 million non-cash payment transactions worth RMB 8.6 billion in Shenzhen in 2023. This is made possible by the accelerating interoperability of payment tools across the borders, which includes e-wallets, e-CNY, and fund remittances for property purchases.
Going in the other direction, mainland Chinese residents are looking more to Hong Kong for high-end services, such as wealth management, and insurance. Mainland visitors accounted for 26%, equivalent to HKD 29.7 billion, of the total life and medical premiums in the first half of 2024, according to Hong Kong’s Insurance Authority3.
Hong Kong is one of the most popular destinations among mainland Chinese for overseas investment, and it is forecast to overtake Switzerland as the world’s largest offshore wealth management hub by 2026.
Financial infrastructure has a role to play here. The standout here is Wealth Management Connect, which was launched in 2021 to allow residents to invest in the wealth management products distributed in the city cluster, including cross-border transactions to Hong Kong and Macao.
In 2024, the initiative was enhanced by a refinement to the eligibility criteria of investors in Mainland China, the addition of securities firms to participating institutions, and broadening of the range of products4.
The role of Hong Kong
As the GBA’s international financial centre, Hong Kong plays an important role in the development of the region.
“We are well-positioned to enable GBA corporates to come to Hong Kong and leverage our markets, our platforms, our infrastructure to raise funds and gain access to international markets,” said Daniel Leong, Division Head, External Department, Hong Kong Monetary Authority.
One of the attractions of Hong Kong to companies from the GBA is its deep liquidity – not only in US dollars, but also in renminbi. In fact, the city has the world’s largest and deepest pool of offshore renminbi liquidity, worth over RMB 1 trillion. Furthermore, more than 70% of the world’s RMB payments are settled in Hong Kong5.
The ready availability of the Chinese currency is not only useful for companies looking to raise offshore capital, it also is relevant to companies looking to establish a regional treasury centre in the city.
Hong Kong is home to a wide and diverse range of professional talents: including lawyers, accountants, and wealth managers. At an individual level, mainland Chinese tourists are taking advantage of what Hong Kong has to offer in terms of wealth management. For corporates, Hong Kong professionals are well-placed to help companies from other parts of the GBA to go global.
Looking to the future, the GBA promises to offer continuous developments, taking the unique advantages of the region, such as the One Country, Two Systems governance system used in Hong Kong and Macao.
“We can see lots of policy innovation in the GBA on how to attract more talent, capital, while at the same time improving the logistics,” said Guangnan Zhang, Professor and Director, Institute of Guangdong, Hong Kong and Macao Development Studies, Sun Yat-sen University.
HSBC 11th Annual China Conference
The event took place in Shenzen on 2-3 September 2024 and was attended by industry leaders, policymakers, and institutional investors, who provided insights into the topics impacting investments in China, including geopolitics, the macro and business environment, as well as global trade and investment relationships.
