CLOSER CONNECTIONS MAGNIFY THE APPEAL OF THE GBA

By AnnaChu, Managing Director, Head of International Subsidiary Banking, Hong Kong, HSBC

Opportunities in the Greater Bay Area are as diverse as the region itself. With travel restrictions lifted and integration accelerating once more, British businesses can benefit from deeper connectivity.

The full resumption of cross-border travel between mainland China, Hong Kong and Macau has brought renewed momentum to the Greater Bay Area (GBA).

Here in Hong Kong, the return to normal ended four consecutive quarters of negative growth, with GDP up 2 7% year on year in the first quarter of 2023 More than 625,000 mainland tourists visited Hong Kong during the golden week holiday at the start of May. Guangdong’s economy expanded 4.0% in the first quarter, while retail sales advanced 5.1% and fixed-asset investment rose 7.4%.

After three years of disruption, all of this is good news for British businesses with an eye on the GBA.

Whether using Hong Kong as a springboard to sell goods and services in China or taking advantage of the GBA’s advanced manufacturing capacity, British businesses can benefit from the closer integration of their operations – physically, financially and digitally.

Two-way traffic

The GBA plan envisages the closer integration of the two SARs and nine municipalities in neighbouring Guangdong province into one of the world’s most technologically advanced, economically connected and liveable mega-conurbations.

Guangdong has been China’s manufacturing hub since the 1990s and – as a result – China’s most prosperous province for more than 30 years Over that period, each municipality in the GBA has developed its own unique strengths.

Zhongshan, for example, is a manufacturing centre for furniture and home appliances, while Zhuhai is renowned for printing supplies and yacht building. Foshan is traditionally famous for fish and ceramics, and more recently for electronics and precision instruments. Further east, Huizhou is known for petrochemicals and womens’ footwear.

New opportunities are emerging as Guangdong moves up the value chain. The government is actively supporting the development of new economy sectors, including biomedicine, new energy and ultra-high definition video displays.

Dongguan, the province’s third-largest city, now produces a quarter of the world’s smartphones Shenzhen is China’s undisputed innovation centre, home to more technology unicorns than any other GBA city, and Guangzhou, the provincial capital, is China’s largest e-commerce hub Jiangmen, an agricultural city, has expanded in automobile parts, and Zhaoqing, a low-cost manufacturing hub and the least affluent of the nine Guangdong cities in the GBA cluster, is eager to develop its higher-value manufacturing base, including products like electric vehicles and biopharmaceuticals.

Investments in infrastructure – road and rail as well as digital – provide a strong foundation for businesses looking to use the GBA as a base for smart manufacturing. More industrial robots and automobiles are made in Guangdong than anywhere else in China.

Guangdong’s investments in digital transformation include an enviable 5G communications network. At the end of 2022, the province boasted more than 210,000 5G base stations, the most among all mainland Chinese provinces.

Digital access

These technological advances are also making the GBA a more attractive – and accessible – market for suppliers of high-quality products and services The GBA’s 86 million people enjoy considerably higher disposable incomes than the average in China, and Guangdong province accounts for 23% of all goods sold online in mainland China.

Cross-border e-commerce trade value in Guangdong reached RMB645 billion in 2022, having grown by more than 40 times since 2015.

This creates opportunities for British businesses involved in a broad range of sectors, including education, professional services, healthcare and consumer goods.

And it certainly helps that Chinese consumers have an affinity for British craftsmanship. Many leading British consumer brands now derive a large or leading share of their global revenues from China, with an outsized share of those sales coming from the GBA.

As an international bank, we are excited about the emerging opportunities in financial services, including the liberalisation of market infrastructure in Hengqin and Qianhai announced earlier this year.

An ideal launchpad

This two-way appeal – as a manufacturing hub as well as a consumer market – makes the GBA attractive for a wide range of British businesses.

The GBA is not just a place to make and sell things, however. This affluent southern region can also provide a base from which British firms can scale their businesses across the rest of China's post-pandemic economy.

The central government in Beijing has designated Guangzhou an “international consumption centre” which means that by making a splash in the city, international brands could drive awareness of their products and services throughout the rest of the country.

The pandemic period has changed the way business is done in China. After three years of digitalisation, international companies need to adapt to expectations of faster payments and online sales. Businesses can also benefit from more efficient treasury operations, thanks to simplified cross-border transfers and real-time payment systems.

Further measures announced in February will also deepen the financial connectivity between Hong Kong and Guangdong Among the most significant are steps to improve access to funding for start-ups and small businesses on either side of the boundary, as well as plans to improve linkages between the bond markets in Hong Kong and Shenzhen.

China’s reopening is a welcome boost for all ambitious businesses with a presence in the GBA, but there are still challenges to overcome. Firms wishing to tap into that opportunity need to understand the differences in the legal and operating environment between Hong Kong, Macau and Guangdong. Standards and policies remain starkly different in many industries, as do local expectations around the way business is done. A financial institution with deep expertise in these areas and connections across the region can help companies navigate these nuances and capitalise on the opportunities ahead.

About The Hongkong and Shanghai Banking Corporation Limited

HSBC serves customers worldwide from offices in 62 countries and territories. With assets of US$2,990bn at 31 March 2023, HSBC is one of the world’s largest banking and financial services organisations.