Regional Integration and Economic Future: Opportunities and threats within Greater Bay Area

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Speakers

Recently, the Greater Bay Area (GBA) became an important subject attracting great attention from all sectors of society. The “Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area” designates five strategic positions of the region: a vibrant world-class city cluster; a globally influential international innovation and technology hub; an important support pillar for the Belt and Road initiative; a showcase for in-depth cooperation between Mainland China, Hong Kong, and Macao; and a quality cycle for living, working, and traveling. On 19 March 2022, Prof. CHEUNG, Prof. LOW, and Prof. TANG discussed how Hong Kong could leverage its institutional advantages and unique resources by utilizing the GBA platform to facilitate economic transformation and shape a more promising future.

Prof. CHEUNG first elaborated on Hong Kong’s economic transformations since the 1950s. The first economic transformation from the 1950s to the 1960s extended Hong Kong’s economic focus from re-export to light manufacturing industries. From the 1980s onward, the second economic transformation shifted the city’s economy to the financial and service sectors. During that period, Hong Kong served as a role model for mainland cities considering economic reforms, an intermediary connecting China and the world, and the “front shop” of the “back factory” in the Pearl River Delta. 
Nevertheless, the economic balance between Hong Kong and Mainland China reversed after 1997. Hong Kong 's GDP was 27% of the GDP of Mainland China in 1993, but now it is only 2.2%. Moreover, Hong Kong is facing a series of economic uncertainties, e.g., the dilemma between positive non-interventionism and a proactive governance approach and lacking a strategy for integrating into Mainland China’s economy while maintaining its unique advantages. Furthermore, Hong Kong suffers from several economic weaknesses, e.g., high production costs, rigid bureaucratic procedures, and falling competitiveness in innovation.

Prof. CHEUNG then recommended that Hong Kong launch the third economic transformation through integration into the GBA. Nevertheless, Hong Kong must redefine its strategic positioning carefully. For example, “innovation” needs to be integrated with the city’s best competitive edges – the financial, business, professional, and other high-value-added sectors. The city also needs a better understanding of China. Instead of being passive, Hong Kong should play a leading role in the GBA and an active role in collaborating with ASEAN.

 
Prof. LOW first commented that regional integration could create risk exposures for small economies, e.g., the drain of talents, migration of the manufacturing sector, dissipation of technology growth, and a less diversified economy. As one of the major cities of the GBA, Hong Kong must strike a balance between integration and distinctiveness. Hong Kong’s value to the GBA will be much more significant if it can differentiate itself from other cities in the region. 

Second, Prof. LOW indicated that one particular area where Hong Kong is distinctive from other cities in the GBA is its close economic relationship with Southeast Asia. The economic growth of Southeast Asia will lead to a more extensive consumer base and greater demand for sophisticated services. Moreover, the global supply chain reconfiguration will spur investments in Southeast Asia. Hong Kong can be the gateway for the GBA’s outward FDIs and high-ended exports to Southeast Asia.

Currently, Hong Kong's innovation capacity is relatively weak compared with that of other major cities in the world. Hong Kong needs to foster a vital innovation and enterprise ecosystem to maintain its competitiveness. Furthermore, Hong Kong should strengthen its public healthcare system and design a more practical COVID-19 strategy to ensure that its status as an international city is sustainable.

Prof. TANG first commented that Hong Kong has always benefited from the “dividends” of globalization by serving as a middleman between China and the world. In the past, Hong Kong functioned as an intermediary between China’s foreign trade and inward FDIs to China. Now, Hong Kong is a beneficiary of China’s “Going Out” strategy. During the period of hyper-globalization, Hong Kong enjoyed a vast benefit by adopting an “auto-pilot” economic approach. Yet this approach has imposed silent costs on the city’s economy in the long run, e.g., over-reliance on the financial sector, dissipation of value-added capacity, and a hollowing out of the middle class. In addition, Hong Kong is encountering multiple economic headwinds, e.g., huge income inequality, “slowbalization” and de-intermediation, limited labor mobility with other economies, an incomplete innovation ecosystem, a changing geopolitical landscape, and a post-pandemic new normal.

Prof. TANG agreed that Hong Kong desperately needs a third economic transformation. However, the prerequisites are a proactive economic strategy and socioeconomic adaptability. Such a transformation also requires diverse talents, especially in scientific and technological fields, and the development of new industries, e.g., health tech, green tech, and semiconductors. Prof. TANG recommended that Hong Kong leverage the Regional Comprehensive Economic Partnership (RCEP) to transform itself into a center for RMB exchange, legal support, and big data. Hong Kong should also participate strategically in the GBA’s industrial ecosystem, attract high-tech multinationals, actively cultivate talent for a range of industries, increase land supply, and promote advanced production technologies.

Last but not least, all speakers agreed that the city’s government should strengthen its policymaking and policy implementation capacity and proactively coordinate actors from key sectors in Hong Kong, Mainland China, and Southeast Asia.

(From left): Prof. Anthony B.L. CHEUNG, Prof. Donald LOW, Prof. Heiwei TANG

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