The past two years have been incredibly difficult for businesses worldwide. One could argue it has been that way for more than a decade. For Hong Kong, a territory about 1.4 times the size of New York City with a population of 7.5 million, it has also been a time of immense change – both good and not so good. And I am asked almost every other day “is Hong Kong still the right place to set up an international business”?
Hong Kong’s credibility as a business centre has always been built upon its institutions, set up during British rule and continued under its special status as the Hong Kong Special Administration Region since the 1997 handover. The financial sector has been one of the biggest beneficiaries of this and over the decades Hong Kong’s free flow of capital in and out have benefited investors globally.
However, after the implementation of the National Security Law, investors and businesspeople everywhere have had concerns about the impact on the territory’s global financial status – in particular, should they consider moving capital, assets, or operations in the short to medium term? And there are concerns about potential deteriorating Sino-US relations making this even worse.
So, what is the upside here? Here are just a few to consider:
- Hong Kong is still preferable when it comes to accessing the Chinese market when compared to other financial centres and is still the primary gateway to China. It is more attractive for foreign investors to invest in Chinese companies listed in Hong Kong than say Shanghai and Shenzhen as Hong Kong is not subject to the China’s capital controls.
- Hong Kong’s international standing as a global financial centre has helped China to promote greater worldwide use of its currency, the renminbi, or yuan. Outside the mainland, Hong Kong is one of the few places where the yuan can be traded.
- The development of the Greater Bay Area will make Hong Kong an even more important player in fund raising. Hong Kong is major part of the Greater Bay Area, so while this will lead to it being more integrated into to the PRC it will also contribute to further opening up China to the rest of the world.
Let us take a brief look at the Greater Bay Area and what this means to Hong Kong as being very relevant in global business going forward.
- The world’s largest metropolitan region
The Guangdong-Hong Kong-Macao Greater Bay Area (GBA) is made up of the two Special Administrative Regions of Hong Kong and Macau, and the nine municipalities of Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen and Zhaoqing in Guangdong Province. It has a total population of more than 70 million, and area of around 56,000 sq km.
- Unprecedented growth
GDP in the GBA has increased more than twenty-fold since the handover of Hong Kong in 1997. Hong Kong will no doubt play a major role within the GBA to raise funds for the phenomenal growth still projected for the area.
- Highly developed infrastructure
The GBA will house a new Silicon Valley-type technology and innovation hub on a massive scale. Other projects either completed or under development include:
• Hong Kong-Zhuhai-Macau Bridge, to link Hong Kong to Zhuhai and Macau.
• Express Rail Link to connect Hong Kong to Shenzhen and Guangdong and to China’s high-speed rail network.
• Shenzhen-Zhongshan Corridor, an eight-lane highway to reduce travel time between Shenzhen and Zhongshan/Jiangmen.
- Hong Kong to take a leading role in liberalising the US$1.5 trillion economic region.
Once it is fully integrated, the GBA will be able to serve two other critical functions: increasing China’s ability to value-add and move towards further internationalisation for the mainland. The area will be an important international centre for financial services, innovation, trade services and logistics, advanced manufacturing, and tourism.
As a metropolitan region, the GBA will allow each of the cities and provinces to focus on their strengths and leverage off the strengths of the others rather than seek to compete. Chinese tech giants Huawei and Tencent have already embraced this area as the way forward.
There are fears that Hong Kong and Macau’s freedoms will diminish as a result of integrating into the GBA, but others have argued that it will further open up the Pearl River Delta to opportunities for international business.
The GBA is obviously a massive undertaking and fraught with integration issues that will need to be resolved. But it has the potential to rival all other similar areas globally – and Hong Kong will be front and centre for this. This will keep Hong Kong very relevant for international business, as a major financial centre and trading hub for many years to come.
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