GBA hurt by Cold War, pandemic and protests

August 17, 2020 09:19
Photo: Bloomberg

The ambitions of the Greater Bay Area (GBA) has been badly hurt by the Sino-U.S. Trade War, COVD19 pandemic and year of protests in Hong Kong.

The GBA remains the strategy of the central government for Hong Kong, Macao and nine cities of the Pearl River Delta. Its aim is to integrate the two SARs more closely with the mainland and its economy.

Last week the Standing Committee of the National People Congress approved the latest measure in building the GBA – allowing lawyers from the two SARs to practice in the nine PRD cities, after they have acquired mainland legal qualifications.

Earlier, the People’s Bank of China announced “Wealth Management Connect”, under which residents of the nine PRD cities can buy eligible investment products distributed by banks in Hong Kong and residents of Hong Kong can do the same for products in the GBA area.

Both measures are good for Hong Kong – but a meeting of the Chinese People’s Political Consultative Conference in Beijing last month heard that many obstacles were blocking realisation of the GBA.

These include a lack of channels for cross-border R & D funding: incompatible rules and regulations: competition among the cities: a mismatch of resources: and the absence of an intellectual property rights protection regime, speakers at the meeting said.

For example, the five airports of the GBA compete fiercely against each other. Guangzhou and Shenzhen are eagerly expanding their international routes, which is the strong point of Hong Kong. The airports of Zhuhai and Macao are underutilised. In this environment, made worse by the pandemic, who wants to give up routes or services to a competitor?

Since 1980, Guangdong has been the pioneer of China’s reforms, attracting more foreign investment and exporting more goods than any other province. Last year, it exported US$444 billion worth of products, with the U.S. the largest market, taking US$101 billion.

But this future is now at risk because of the Sino-U.S. trade war, rising production costs and increasingly severe regulations. In June, the Chinese Manufacturers Association of Hong Kong published a survey of 400 of its investors in the GBA. In 2018, there were 21,345 HK-funded firms in the GBA; they provide 2.71 million jobs.

Of those interviewed, 81 per cent said that taxation was cumbersome and administrative charges excessive, 83 per cent said they were affected by the mainland’s constantly changing environmental, trade and investment policies and 80 per cent said they had labour shortages.

Like other firms, they are fearful of the trade war, which could lead to quotas, restrictions or a ban on their exports to the United States. In anticipation of possible sanctions, many firms, Chinese and foreign, are moving production out of Guangdong to Vietnam, Malaysia and other South Asian and Southeast Asian countries.

The pandemic has also badly affected development of the GBA. One of its main objectives is to increase people-to-people exchanges between the two SARs and the nine cities. Quarantine restrictions since January have made this extremely difficult, with a few exceptions.

The pandemic has also blocked another objective of the GBA – the migration there of Hong Kong people. Developers in Zhuhai, Zhongshan, Jiangmen and Shenzhen have been strongly marketing their apartments, greatly cheaper than those here.

A daily commute from these cities to Hong Kong is possible but time-consuming, with the need to pass through two border posts and then make a further journey to the office or factory. If parents wish their children to attend schools here, the children must make the same journey. During the pandemic, this has been impossible. Will there be similar viruses in the future?

The year of street protests and passage of the National Security Law have poisoned relations between many Hong Kong people, especially the young, and the mainland. Some say that, even for a higher salary and better career prospects, they will not take a job in the GBA.

Last year, the central government promulgated a set of policies to help Hong Kong people settle in the GBA. They included HK people being treated as local residents in purchasing properties in GBA cities: their children would be treated as mainlanders in attending local schools: and supporting the use of mobile electronic payments on the mainland by HK people.

Hong Kong’s finance and legal professions welcomed the Wealth Management Connect, but a great deal remains to be done. In a commentary, lawyers Linklaters said: “the scheme will involve coordination by the authorities to find common ground and policy space within the three different regulatory regimes.” In the initial stages, the only items offered will be “mainly low-risk, simple investment products.”

Linklaters said that no details had been given on what these will be. “Could this scheme permit instructions such as certificates of deposit and exchange-traded funds?” Another issue is how much a mainland individual will be allowed to invest. Currently, he or she is subject to an annual quota of US$50,000 for foreign currency conversions or purchases relating to capital account items.

Wang Xianghui, director of the Policy and Strategy Research Centre at Beijing Aviation and Aerospace University, said: “Hong Kong only accounts for 3.8 per cent of China’s GDP. Since the handover, its importance has declined. After these street protests, Shenzhen has set up a Socialist Pioneer Model Zone and Macao has applied to set up an offshore and securities market. The eggs in Hong Kong’s basket are falling out.”

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A Hong Kong-based writer, teacher and speaker.