26 September 2018

Proposed Guangdong-HK-Macau FTZ has no clear selling point

Even before the Shanghai pilot free-trade zone was inaugurated in late September, many cities and regions have been lobbying for a similar status. But at the moment, it’s anybody’s guess whether Beijing is prepared to bestow the same standing, and the privileges that go with it, on any of the FTZ wannabes in the queue.

But it certainly won’t hurt to try, especially for a regional economic powerhouse like the affluent Pearl River Delta.

The 21st Century Business Herald, a Guangzhou-based newspaper, reported on Thursday that the ruling party’s elite will agree during their plenum, slated to open on Nov. 9, to set up the Guangdong-Hong Kong-Macau FTZ, citing an anonymous source privy to the inner workings of the Ministry of Commerce.

The geographic scope of the proposed free trade zone will cover Hong Kong, Macau, Hengqin, Qianhai, and Nansha. Interestingly, it is still unclear whether Shenzhen, the country’s first special economic zone adjacent to Hong Kong, and Guangzhou, the provincial capital, are included in the proposal.

According to the report, the establishment of the Guangdong-Hong Kong-Macau FTZ is Beijing’s way of assuaging the feelings of Hong Kong as the city will face increasing challenge from the Shanghai FTZ, while facilitating its economic integration with Guangdong and Macau.

Intriguingly, the five areas mentioned are already special zones in the Pearl River Delta, each with its own orientation. Hong Kong, of course, is a unique free trade zone and also a well-accepted international financial hub. Macau is the only place that can run casinos in China.

Meanwhile, Qianhai is positioned as a gateway for Hong Kong’s offshore renminbi funds going back to the mainland for higher returns.  Hengqin serves to reinforce the development of Macau, and Nansha is intended to become the delta’s hi-tech industrial center.

Given their different orientations, the question then arises – what preferential policies or reforms would glue the five places together? If the proposed FTZ puts emphasis on the financial aspect, Macau, Hengqin and Nansha would have little roles to play. Expanding Macau’s casino franchise across the region would be equally unthinkable.

There’s a simple way to get the Guangdong-Hong Kong-Macau FTZ off the ground, and make it more economically vibrant: lower all the barriers that hinder the free flow of talent, capital, goods and services between them, and then a strong synergy will take hold.

But that probably won’t happen in the near future. For one thing, such an arrangement would require substantial revision of the Basic Laws of Hong Kong and Macau — which is likely to create more trouble than benefits.

From these perspectives, the Guangdong-Hong Kong-Macau FTZ proposition does not seem to be a compelling one.

– Contact the writer at [email protected]




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