The event saw the participation of over 200 delegates and provided a platform for more than 40 speakers, including senior representatives from the British Government and Greater Bay Area (GBA) local governments, and senior representatives from British and Chinese companies based in the UK, cities in the Chinese mainland, and Hong Kong.

Throughout the full-day programme, the discussions focused on the latest developments and strategies for British companies in the GBA region, covering topics ranging from data and technology to trade in services and goods. The conference also explored the potential for investment in the UK by Chinese companies from the region.

Sir Sherard Cowper-Coles, Chair of CBBC, delivering opening remarks at the UK-GBA Conference

In his opening remarks at the Morning Plenary Session, Sir Sherard Cowper-Coles, the Chair of CBBC, highlighted the abundant opportunities in the GBA, including enhanced connectivity, the size of the market, the depth of the talent pool and the policy incentives available. While acknowledging the challenges of establishing a major economic hub, he emphasised CBBC’s role in providing a platform for members to share their vision of the future of the GBA, saying, “CBBC has designed this conference to enhance understanding and awareness of opportunities and challenges, whether for UK business in the GBA or GBA companies looking to invest in the UK.”

Guangdong Governor Wang Weizhong delivering opening remarks at the UK-GBA Conference

Guangdong Governor Wang Weizhong, in a video message during the morning plenary session, said, “We hope that investors all over the world will seize the opportunity to come to China, Guangdong and the GBA to explore the Chinese market and achieve new accomplishments. Guangdong is willing to join hands with our friends from the UK to work closer under the framework of China-UK relations to realise mutual benefits on a higher level and with higher quality.”

Tom Simpson, Managing Director, China, China-Britain Business Council welcoming attendees

Also offering welcome remarks during the morning plenary session were Tom Simpson, Managing Director, China, China-Britain Business Council; Sarah Mann, Consul-General, British Consulate Guangzhou; Zhu Xiaojun, Deputy Director-General, Department of Commerce of Guangdong Province; and Dr Jimmy Chiang, Associate Director-General, Invest Hong Kong

The event continued with keynote speeches from three key speakers: ‘New Opportunities for International Cooperation in the Greater Bay Area (Qianhai)’ by Huang Xiaopeng, First Deputy Director-General, Qianhai Authority; ‘London – Technology, Innovation & Building Global Communities’ by Janet Coyle, CBE, Managing Director, Grow London at London & Partners; ‘Opportunities for Foreign Companies in the Greater Bay Area and HSBC’s Strategic Choices’ by Richard Li, Managing Director, External Relations, South China, HSBC; and ‘Transformation and Growth Through Uncertainty’, by Andrew Harding, FCMA, CGMA, Chief Executive, Management Accounting, AICPA & CIMA.

This was followed by two CBBC-moderated discussions on capitalising on the GBA’s potential for cross-border cooperation and the role British business can play in the development of a sustainable and economically diverse GBA integration strategy.

In the afternoon, attendees had the option to attend one of two sub-forums on ‘International Technology and Innovation Cooperation in the GBA’ and ‘Growth Beyond Borders: Expanding Your Business into the UK and Beyond’, respectively.

Wang Jinxia, Deputy Director General, Qianhai Authority, delivering the opening remarks at the ‘International Technology and Innovation Cooperation in the GBA’ Sub-Forum

Looking ahead, CBBC remains committed to building on the inaugural UK-Greater Bay Area Conference and investigating the future opportunities between the UK and the GBA.

Thank you to our partner, the Qianhai International Talent Hub; our gold sponsors, BSI, HSBC and London & Partners; our silver sponsors, AICPA & CIMA, Berkeley Group and the Welsh Government; and our supporting organisations, the British Chamber of Commerce Guangdong, the British Chamber of Commerce in Hong Kong, the Chinese General Chamber of Commerce Hong Kong, Invest Hong Kong, Guangdong Chamber of International Commerce, China Council for the Promotion of International Trade Shenzhen, China Chamber of International Commerce Zhuhai Chamber of Commerce, the Hong Kong Chamber of Commerce Qianhai and Shenzhen Outbound Alliance.

Click here to see more photos from the event

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What are the Welsh Government’s main goals in China?

We are promoting a wide range of priority sectors for Wales, including life sciences, high value manufacturing, education, food and drinks, and tourism, facilitating the development of trade links for our companies/institutions, and attracting more investments for Wales.

How does the Welsh Government go about reaching a Chinese audience?

In addition to joining promotional events like the UK-GBA Conference, we have set up collaborative partnership with the DBT, CBBC, Chinese governments and regional and national industrial association to promote Welsh industries and investment offers. Moreover, we believe that foreign direct investment (FDI) is led by sound trading partnerships, so we are trying hard to facilitate Welsh firms to export to China, and in this way to increase Welsh firms’ exposure in China, and indirectly promote the Welsh industrial ecosystem to the Chinese business community. We also run social media channels on WeChat, Weibo and Xiaohongshu.

How has China changed in recent years as a target market for investment, exports or FDI?

Due to geopolitical factors, we have seen a drop off among Chinese companies that want to establish R&D centres in Wales, as well as less investment in the tech sector.

What kind of industries is Wales trying to attract from China?

Life Science: We have over 360 Welsh-based life science companies with strengths in med tech, diagnostics, wound healing, regenerative medicine and cell therapy. Around 65% of them are in the medtech and diagnostics sub sector. That’s why we launched a medtech and diagnostics cluster in 2020 with a combined turnover of £1.5 billion. Some of the cluster members are proactively looking for investors to optimise their products and services and expand their sales channels. We also established 46 Centres of Excellence focusing on fields including oncology, neuroscience and imaging, wounds and diabetes, who are open for joint research collaborations.

Automotive: Wales has an established and diverse automotive industry with the supply chain capability to satisfy a wide range of requirements. The supply chain for ULEVs and certainly electric vehicles is very much in its infancy in the UK, but in Wales, we have a number of organisations specialising in power electronics, battery and energy technology, lightweighting and materials that have the potential to play a major role in the development of the industry. The compound semiconductor cluster in South Wales is also adding value, which is deployed across a growing number of applications, including electric and hybrid-electric vehicle motors and chargers, and RADAR and LIDAR for autonomous vehicles etc.

Why is the GBA important to Wales?

The Greater Bay Area is a region with high openness, a strong economy, and a great deal of strategic importance in China, characterised by innovation power and advanced engagement with international business. Meanwhile, both GBA and Wales share similarities in terms of industrial layout, with priority sectors including life science, advanced manufacturing, and information technology.

What is the Welsh Government’s strategy in the GBA?

This is very much a learning journey for the Welsh government, as we would like to learn more about the businesses in the Greater Bay Area, and specifically their requests to invest overseas, in order to better our service to accommodate and facilitate their business development. More importantly, we would like to put Wales on the map for all businesses in the GBA, and establish the business connection between Wales and GBA.

What do you hope to get out of this GBA conference?

We would like to further understand the industrial layout of the GBA, and identify opportunities for our companies/institutions in areas like trade and R&D. We also want to understand the need from GEA companies, especially from the investment perspective, and how we can optimise our service, and better support them expanding their business into the UK market.

Register now for the UK-GBA Conference in Shenzhen on Tuesday, 21 November

CBBC’s UK-GBA Conference, coinciding with the visit of CBBC’s Chair, Sir Sherard Cowper-Coles, and Chief Executive, Andrew Seaton, will provide a platform for senior-level representatives from our Members, partners, and other key stakeholders to discuss the latest developments and strategies for British companies in the GBA region. Also joining us will be representatives from the British Government, Shenzhen and other GBA local Governments, as well as representatives from British and Chinese companies in Guangdong, Hong Kong, Macau, and from other parts of China.

The post The surprising links between Wales and the Greater Bay Area appeared first on Focus - China Britain Business Council.

The hall at London’s Battersea Power Station is packed, full of start-ups, innovators, entrepreneurs, and scale-ups, all eager to absorb insights from the expert panel of tech companies, venture capitalists, investors, and futurists gracing the stage. This was the Future Horizons event, part of the annual Grow Summit presented by London and Partners. Speakers included executives from Mastercard, a16Z, Fidelity and other renowned entrepreneurs and business leaders such as Baroness Martha Lane-Fox of Soho, the co-founder of Lastminute.com, and Reid Hoffman, founder of LinkedIn.

Organisers London and Partners champion London as a rival to Silicon Valley, positioning it as a global investment hub with a strong emphasis on the tech industry.

Janet Coyle CBE, the organisation’s Managing Director of Business Growth, is heading to China to speak at the upcoming CBBC conference on the Greater Bay Area (GBA). She aims to attract the growing number of Chinese tech companies based in the GBA to invest in London.

“The GBA is by far generating the most opportunity. Fifty to sixty per cent of all our business comes from that area,” Coyle says. “We identify companies looking to expand into Europe, and we want them to choose London,” she adds. London and Partners is partly funded by the Greater London Authority, with the remaining funds self-sourced through sponsorships and events. Their primary goal is to draw investment into the capital, mostly through foreign direct investment (FDI) and by supporting companies looking to expand into London. They also attract and bid for major international business events and conferences, attract tourism, and assist London companies in going global.

Coyle acknowledges that recent geopolitical tensions have impacted London-based companies eyeing expansion into China. Still, she notes that Chinese interest in the UK remains strong.

For Coyle and her team, attracting Chinese companies to the capital is a complex and often slow process. Identifying suitable companies, understanding their needs, building relationships, and facilitating their launch in London can take years. Coyle cites Chinese FinTech company Ping Pong and electric car company BYD as recent high-profile successes.

Coyle explains that inbound Chinese investment slowed somewhat due to the Covid-induced pause and a focus on domestic growth keeping many companies from expanding abroad. However, she notes, “now we’re starting to see the momentum building. London is home to the second-highest number of Chinese companies after Singapore.

“Chinese companies want to come because of the business infrastructure, the talent, the innovation, and the available growth capital,” she emphasises. “Despite global trends, we are still seeing VCs investing, and London remains a great place to live, with a large Chinese community.”

Over the last six months, London and Partners has regularly connected scale-ups to corporates. Previously limited to London companies, their “meet the corporate” programmes are now open to any global scale-up.

“Whether it’s a company from Shanghai or Shoreditch, they all want the same things: access to customers, money, growth capital, talent, and ideally, access to new markets,” Coyle says. “If we’ve got a company from Shanghai interested in electric vehicles or wanting to connect with, for example, City Hall, we can now make that happen.”

While London and Partners is not a lobbying organisation and align with government decisions, they can assist Chinese tech companies in finding their feet in London, with a predominant focus on sustainability, enterprise, fintech, cyber, creative tech, and health tech or life sciences.

“What’s driving global FDI flow is sustainability right now,” Coyle states. “And wherever you go, including China, everyone is asking about sustainability. London is ranked number one globally for Green Finance.”

In addition to clean tech and sustainability, health tech, and mobility, there is a strong demand for creative tech – immersive, gaming, VR, AR – though Coyle admits that FinTech will always be strong for London.

“As a city, we have reinvented ourselves over hundreds of years and are used to it. Whether it’s Covid-19 or global downturns, we have incredible entrepreneurs who get us out of this and build incredible pieces of tech,” she concludes. “FinTech emerged from a huge crash, creating a new model for banking. London stands strong in times like this.”

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The Greater Bay Area (GBA), which covers nine municipalities of Guangdong Province (Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen and Zhaoqing) around the Pearl River Delta, plus the two Special Administrative Zones (SAR) of Hong Kong and Macau, has long been a trading hub that connects China to the rest of the world.

For centuries, the trading posts at Lumen and Guangzhou welcomed traders from Europe, the Middle East, Africa, India and South East Asia. Even during the relatively isolationist Mao era, the Canton Fair (now known as the China Import and Export Fair) continued to host foreign merchants twice a year. In 1953, the famous Icebreaker Mission, led by the British economist Joan Robinson, travelled to Guangzhou to sign a business arrangement which ended the boycott imposed by the UN in response to the Korean War.

The Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area, published on 18 February 2019, set out a bold vision for a region that has long been one of China’s most dynamic and highest in potential. The plan proposed a far-reaching overhaul of the Pearl River Delta’s infrastructure and administrative set-up to expand on existing strengths and pave the way for further economic expansion.

The major cities of the Greater Bay Area

The region has developed rapidly since the release of the plan, despite the impacts of the Covid-19 pandemic, largely thanks to five main geographical and structural advantages:

1. The GBA hosts three of the world’s 10 busiest container ports — Shenzhen, Guangzhou and Hong Kong  (according to the World Shipping Council) — and has direct access to the South China Sea, which carries an estimated one-third of all global shipping.
2. Together with a sprawling network of waterways, the region has over 11,200km of express roads and a railway network the size of a small country, providing convenient and easy access to China’s vast consumer market.
3. The GBA is a key manufacturing hub, accounting for 35% of exports from mainland China, Hong Kong and Macau. Advanced manufacturing, in particular, is becoming a key area of investment, with the region seeing major growth in new energy industries such as lithium batteries and photovoltaics.
4. The region hosts some of the most innovative and technologically advanced companies on earth. In 2017, nearly 14% of all Chinese patents were filed by companies based in the GBA. Shenzhen alone accounted for over 40% of international patent applications from China.
5. Businesses in the delta can access three of the world’s leading financial centres. Aside from Hong Kong, which occupies fourth place on the Global Financial Centre Index, Shenzhen and Guangzhou, which come in at 9th and 25th respectively, represent two new emerging finance hubs.

The British business community is watching the development of the Greater Bay Area with great interest. For UK companies consider it to be an important driver for their Greater China operations, whether in financial services, technology and innovation, or other sectors.
Sir Sherard Cowper-Coles, Chair, China-Britain Business Council (CBBC)

Key areas of opportunity in the Greater Bay Area

Infrastructure 
There are few regions as well-networked as the GBA. Large-scale infrastructure projects, including the Hong Kong-Zhuhai-Macau Bridge, completed in 2018, and the express rail network that links Hong Kong to Shenzhen and Guangzhou and onwards to China’s vast high-speed rail network, have made it quick and easy to travel around the region, achieving a level of convenience that will only expand now the restrictions of the Covid-19 pandemic have been lifted. Green infrastructure – including low carbon transportation, green buildings, water and waste management, and more – is also a major part of the region’s current infrastructure boom, with green infrastructure investment accounting for RMB1.9 trillion of the total RMB 5 trillion earmarked for major infrastructure projects in Guangdong Province’s 14th Five-Year-Plan (FYP).

Advanced and high-tech manufacturing
According to the Department of Industry and Information Technology of Guangdong Province, in the first six months of 2022, advanced manufacturing and high-tech manufacturing accounted for 55.9% and 33.1%, respectively, of the industrial added value of the GBA. Key industries include electronic communication devices, automobiles, and chemical products. The growth of this sector in the GBA has been and will continue to be made possible by the provision of research funds, the construction of facilities such as high-tech industrial parks and national supercomputer centres, and the recruitment of human resources from around the world (for example, the Shenzhen Government has offered subsidies for undergraduates who move to Shenzhen). The establishment of cross-border “cooperation zones”, such as the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone, has also played a key role.

In Hong Kong itself, the government has made unprecedented strides to promote information and technology development by investing more than HK$130 billion from 2017 to 2021. StartmeupHK, an initiative by InvestHK, also supports startup ecosystem stakeholder companies to set up a presence in Hong Kong, and provides a one-stop service platform to enable them to grow from Hong Kong into the wider GBA.

Financial Services
A growing economy and an increasingly affluent population have made the GBA an attractive market for financial services products. Hong Kong is already an international finance centre, with financial services accounting for 23.3% of the SAR’s GBP in 2020, and the GBA has enabled much greater connectivity between Hong Kong and mainland China’s capital markets. On 10 September 2021, the Cross-boundary Wealth Management Connect was officially launched to enable residents in Hong Kong, Macao and nine cities in Guangdong Province to carry out cross-border investment in wealth management products distributed by banks in the area. According to a January 2023 report published by Bain, SMEs in the GBA also present a substantial opportunity for financial services providers, requiring support for expansion “including more convenient lending, professional wealth management services, flexible insurance policies, and comprehensive cash and liquidity management.”

Register now for the UK-GBA Conference in Shenzhen on Tuesday, 21 November

CBBC’s UK-GBA Conference, coinciding with the visit of CBBC’s Chair, Sir Sherard Cowper-Coles, and Chief Executive, Andrew Seaton, will provide a platform for senior-level representatives from our Members, partners, and other key stakeholders to discuss the latest developments and strategies for British companies in the GBA region. Also joining us will also be representatives from the British Government, Shenzhen and other GBA local Governments, as well as representatives from British and Chinese companies in Guangdong, Hongkong, Macau, and from other parts of China.

The post Opportunities for UK businesses in the Greater Bay Area in 2023 appeared first on Focus - China Britain Business Council.

Cities in the Greater Bay Area (GBA), which links nine cities in Guangdong with Hong Kong and Macau, already present foreign businesses with subsidies based on the size of their investment and future contribution to the local economy with specific requirements and reward schemes varying on a municipality and sector basis.

Shenzhen is an excellent example of how the GBA plans to facilitate a business friendly-bureaucratic framework, encouraging multinational companies to establish regional headquarters in its sophisticated environment. If companies meet requirements regulating their local and overseas entities’ registered capital and management structure, the approved headquarters are entitled to a reward ranging from RMB 3-6 million (£346,000-692,000).

Over the last few years, Shenzhen has also laid out a series of provisions to simplify the overall company incorporation process, which includes shortening the time of business license issuance to a few working days and introducing company secretary virtual addresses and dormant company status. 

Investors aside, today Shenzhen is also one of the most attractive cities for local and international talents in the new technologies and logistics sectors. The Notice by the Ministry of Finance and the State Taxation Administration of the Preferential Individual Income Tax Policies for Guangdong-Hong Kong-Macao Greater Bay Area (No. 31 [2019] of the Ministry of Finance) has implemented an individual income tax (IIT) subsidy scheme aimed at foreign talents employed in the nine core cities of the GBA.

The policy aims to limit the total IIT burden for the fiscal year to 15% of the yearly taxable income, and provide a refund for the exceeding part when meeting a number of specific requirements set by each municipality taking part in the initiative from 1 January 2019 to 31 December 2023.

What corporate income tax benefits does the GBA offer?

Introduced nationwide via Announcement No. 24 [2017] of the State Administration of Taxation), a reduced corporate income tax (CIT) rate of 15% against the standard rate of 25% is granted to high-tech enterprises that are eligible for accreditation based on requirements that vary on a municipal level, based on:

• Establishment and business scope of the entity (i.e., encouraged industries of investment)
• IP protection and ownership
• Research and development-to-revenue ratio
• Personnel specialisation-to-total-organic ratio
• Innovation (graded system)
• Environmental protection

This regulation finds its best application in the GBA, where tech giants like Huawei, Tencent and Foxconn are based.

Startups and small or medium enterprises that might not fall into the above sectors or investment size can still benefit from the beneficial CIT rate granted by Article 2 of The Ministry of Finance and the State Administration of Taxation on the implementation of the inclusive tax relief policy for small and micro enterprises (Caishui [2021] No. 12). This halves the progressive enterprise income tax rate previously set by (Caishui [2019] No. 12) from January 1^st 2021 to December 31^st 2022.

Table 1: CIT tax rates for small and micro enterprises

The above tax treatment, implemented nationwide, would grant investors access to the GBA infrastructure and environment even when the investment volume and operations are limited during the startup period.

Understanding intellectual property rights in China

In 2020, China revised four IP-related laws and regulations (namely the Patent Law, Copyright Law, Criminal Law and the provision on the transfer of suspected criminal cases by administrative law enforcement organs); issued six judicial interpretations (covering commercial secrets infringement, application of laws in infringement disputes, and IP-related criminal cases); implemented more than twenty policies, and set two national standards for IP protection (related to IPR on e-commerce platforms and recommended national standards for patent guidance).

Through these continued efforts, China now ranks 14th among 131 economies according to the World Intellectual Property Organisation’s Global Innovation Index 2020. While ranking highly in patent registrations and total exports of creative products, China still needs to structure further reforms in areas like human capital, infrastructure, and institutional construction.

Navigating the protection of intellectual property in the Greater Bay Area

Among the challenges and opportunities of the GBA for foreign investors, the biggest might be navigating multiple municipal and regional jurisdictions. It is quite common for foreign investors to set up a Hong Kong holding company (under Hong Kong laws) for foreign exchange and tax purposes, and a PRC Wholly Foreign-Owned Enterprise (under PRC laws) 100% owned by the Hong Kong holding company for handling operations and the employment of local staff. While setting up entities in different jurisdictions can be a good strategy at the corporate level, it can create challenges for IP protection.

Beyond contractual or corporate matters, IPR territoriality is decisive. Apart from rare exceptions (such as so-called “well-known marks”), the registration of trademarks, patents or copyrights in one jurisdiction grants little to no other rights in other jurisdictions. Therefore, a rights owner’s IP protection strategy across the GBA must be assessed case by case according to the rights owner’s interests and anticipated use.

The table below outlines the main differences among the three jurisdictions within the GBA.

Table 2: Differences between the three jurisdictions

The GBA represents a privileged business destination for domestic and foreign companies operating in finance, logistics, innovation and technology, and capital-intensive industries. However, the differences in regulations among the three jurisdictions from legal, accounting and tax perspectives add a level of complexity.

In light of this, companies should carefully plan an entry strategy in the GBA, evaluating all the necessary resources and steps, including how to leverage synergies and incentives in the area, how to comply with the local tax requirements, and how to hire the right and qualified personnel, all the while protecting competitive advantage and key IPR. Working with a trusted partner with local expertise will help you better navigate China’s booming market.

The post How companies in the Greater Bay Area can access tax incentives appeared first on Focus - China Britain Business Council.

The Greater Bay Area (the area linking Hong Kong, Macau, and nine cities in mainland China around the Pearl River Delta including Guangdong and Shenzhen) was conceived as an integrated economic and commercial hub, designed to make doing business in the region easier.

While the GBA’s various free trade and high-tech zones do make it an attractive place to do business, understanding which preferential policies each one offers and which one is right for your business can be confusing. This article offers a brief explanation of each of the types of zones found in the GBA. However, it is worth noting that these definitions and the areas they apply to are subject to frequent change, so it is always best to check with an expert before embarking on a project in the GBA.

State-level new area 国家级新区

This is an urban area that has been given an “administrative readjustment” by the central government and receives preferential policies and privileges granted directly by the State Council. A new area is fairly small, geographically speaking, usually a designated district in a city. Through the establishment of a new area, the central government is signalling that it wants to drive the economic development of that particular area, alter its development trend and ultimately create a rippling economic impact.

China currently has 19 state-level new areas. In the Greater Bay Area, Guangzhou’s Nansha and Zhuhai’s Hengqin are New Areas. Others around the country include Shanghai’s Pudong New Area and Xiong’an in Hebei province, the newest, established in 2017.

Special economic zone 经济特区

This is the name given to the original experimental economic jurisdictions first introduced in the late 1970s at the beginning of reform and opening up. Shenzhen and Zhuhai were two of the earliest because they are located opposite the two SARs (Hong Kong and Macau). The scope and focus of SEZs vary, but most boast economic policies such as tax incentives for foreign investment and greater independence from the central government on international trade activities, and have a focus on export-oriented production.

Besides these, there are also Pilot Zones for Comprehensive Reforms (综合改革试验区). They are similar, but more focused on particular issues, such as coordinated development between urban and rural areas, or how to strike a balance between environmental protection and economic development.

Economic & technological development zone 经济技术开发区

These are zones that are set up to follow particular industrial development trends in the context of regional development. They became popular in the late 1980s and the early 1990s when the government tried to group companies into industrial clusters. Enterprises in the development zones are granted preferential policies for land usage or tax deductions.

China has a total of 219 state-level economic and technological development zones. Jiangsu province leads with 26, followed by 21 in Zhejiang and 15 in Shandong.

Guangdong has six, located in Zhanjiang, Guangzhou, Nansha, Daya Bay (Huizhou), Zengcheng (Guangzhou) and Zhuhai.

High-tech zone 高新区

High-tech industries have always had plenty of government support. The Ministry of Science and Technology is highly involved in the development of these zones, often providing detailed guidelines on which high-tech zone should focus on which sector.

Each of the nine mainland GBA cities has a state-level high-tech zone. The one in Shenzhen’s Nanshan district is ranked second only to Beijing’s Zhongguancun (often called China’s Silicon Valley and the birthplace of companies like Lenovo) among China’s 157 state-level high-tech zones. Shenzhen’s aims to focus on four industries, namely electronic information, bioengineering, new materials and opto-mechatronics.

Dongguan’s Songshan Lake Hi-Tech Zone is seen as an up-and-coming star. It focuses on high-end electronic information, biopharmaceuticals, robotics, new energy and modern service industries

Guangzhou is no slouch, either. Its high-tech zone in the east of the city was established in 1991 and currently ranks ninth nationally. It is home to Guangzhou Science City, Guangzhou Tianhe Software Park, Huanghuagang Technology Park, Non-Governmental High-tech Park and Nansha IT Technology Park.

Dongguan’s Songshan Lake Hi-Tech Zone is seen as an up-and-coming star. It focuses on high-end electronic information, biopharmaceuticals, robotics, new energy and modern service industries. Foshan’s Hi-Tech Zone specialises in automobile and component manufacturing, high-end equipment manufacturing, new materials, smart home appliances, life sciences and optoelectronic technology.

Free trade zone 自贸区

Free trade zones are generally province-sized areas — Guangdong is a Free Trade Zone, for example — and are not necessarily as free as the name implies, i.e. regulations related to tariffs, approvals and management are flexible, not free.

Twelve of China’s provinces are currently designated as Free Trade Zones, including Shanghai, Guangdong, Tianjin, Fujian, Liaoning, Zhejiang, Henan, Hubei, Chongqing, Sichuan, Shanxi and Hainan.

That being said, it is not the whole province that implements this flexibility. Guangdong’s zone actually only includes three districts: Guangzhou’s Nansha, Shenzhen’s Qianhai and Zhuhai’s Hengqin.

This post originally appeared on our content partner Greater Bay Insight

The post Understanding the Greater Bay Area’s free trade zones appeared first on Focus - China Britain Business Council.

The Hong Kong National Security Law (NSL) provoked considerable conversation when introduced by China’s National People’s Congress (NPC) in June 2020. Spooked by its seemingly sudden introduction, foreign business leaders took to the press, predicting that the new law could cause multinational companies to “vote with their feet” and leave the market. Portrayed by Chinese state media and Party-affiliated or Party-leaning analysts and think tanks as an essential piece of legislation that has “restored freedom from fear… following the social unrest in 2019,” how has international business responded to the NSL, one year later?

Background

The NSL was brought into law by decree of the Standing Committee of the NPC, bypassing the Hong Kong Legislative Council (LegCo) as a Mainland Chinese law applicable in Hong Kong under Annex III of the Hong Kong Basic Law (the de facto constitution of Hong Kong that was agreed to implement the Sino-British Joint Declaration in 1997).

That Hong Kong would introduce its own security law was one of the articles of the Basic Law. However, the LegCo never enforced Article 23 due to its unpopularity with the electorate. Fast forward to 2019, however, and the Chinese Government appeared to call time on the LegCo’s deliberations and took matters into its own hands.

Running to 66 articles, the NSL criminalises activities deemed to be associated with secession, succession, terrorism, and collusion; the maximum sentence for these crimes is life in prison. Applying to Hong Kong citizens, residents, non-permanent residents, and companies alike, businesses were quick to ask questions relating to how it would affect the business environment, considering that companies could face fines if convicted and foreign NGOs would be subject to stricter monitoring.

The business response

The NSL has changed how multinationals consider Hong Kong. That said, few have decided to air these concerns publicly, with the majority taking the approach of ensuring quietly that they are compliant rather than endorsing or criticising the NSL. While Hong Kong’s position has not changed on most ‘Ease of Doing Businesses’ indices, multinational companies acknowledge that it has affected the character of the market in a significant way – particularly with regard to employee safeguarding and the handling of data.

The criticism that the NSL makes the SAR just like any other Chinese city finds interesting application when reflecting on how multinational companies consider the market. After all, many multinationals maintain a presence in Hong Kong for the express purpose of doing business in Mainland China and have a long history of being compliant with similar legislation there – ergo, why should they then not accept the situation in Hong Kong? But that is a question outside the scope of this update.

Beyond the personnel and security ramifications of the NSL, three particularly interesting issues affecting business have emerged since its introduction.

The US Government ending Hong Kong’s ‘Special Status’ under US law

Two weeks after the NSL’s introduction, the Trump Administration announced that it was ending preferential economic treatment for Hong Kong through executive order. Speaking in the Rose Garden at the White House after the order’s signing, President Trump described the situation as, “No special privileges [for Hong Kong], no special economic treatment, and no export of sensitive technologies.”

The US and Hong Kong had maintained a special trading status under two agreements signed in the 1980s, that allowed Hong Kong to enjoy lower trade tariffs and a separate customs framework in its dealing with the US. But, it is worth noting that the executive order has no bearing on Hong Kong’s international position as a separate customs territory, because that is recognised by the World Trade Organization (WTO).

However, ending Hong Kong’s ‘Special Status’ under US law has potentially affected the city’s attractiveness as a re-export hub, which was one of the reasons it was so appealing to multinationals in the first place. This legislation primarily impacts companies that incorporate the US into their supply chains, which many UK multinationals do, including automobile manufacturers, semi-conductor & software design companies, and providers of medical devices. In the past, companies could use Hong Kong as a re-export hub, meaning that goods that go through Hong Kong to the US but have come from elsewhere – like China for instance – could avoid the tariffs that the Trump Administration placed on China.

Now that Hong Kong’s ‘Special Status’ is gone, the city is arguably no more attractive than any other port in China when considering supply chain management. The impact on Hong Kong has been substantial. Re-exports to the US previously constituted 7.9% of Hong Kong trade, and in 2019 were worth some $38 billion (£27.3 billion).

But by 2020, that number had fallen to 3.2% or $16 billion (£11.5 billion). To put that figure into context, the value of reexports from Hong Kong to other key markets, including Taiwan, Malaysia, and South Korea, increased by 18%, 2.8% and 9.1%, respectively over 2020, while re-exports to the Mainland (which introduced onerous quarantine policies on mariners, impacting exporters) decreased by 4.7%, still far short of the 58% decrease that US re-exports suffered.

The structural reasons for companies using Hong Kong as an Asia-Pacific hub remain in place – low tax rates, good geographic location, and convertibility of currency

Intensifying competition between Hong Kong and Singapore to attract multinationals

Since the introduction of the NSL, analysts have had their sights set on Singapore, anticipating an exodus of multinationals looking to sell across the Asia-Pacific and into China, but from somewhere deemed safer in terms of national security issues.

When surveyed in August 2020, 23% of US companies with offices in Hong Kong indicated that they were thinking of leaving the territory, according to the American Chamber of Commerce. Meanwhile, 13% had reportedly already taken steps to move out of the city. Furthermore, nine out of 10 respondents listed Singapore as their preferred destination for their relocation.

That said, the majority of companies appear to be staying put for now. After all, the structural reasons for companies using Hong Kong as an Asia-Pacific hub remain in place – low tax rates, good geographic location, and convertibility of currency, for example. Furthermore, the Chinese government’s interest in a Singapore model is well known and, one can assume, businesses anticipate that such a framework will quickly find application in Hong Kong. Singapore scores poorly on measures like freedom of the press and government accountability, but ranks in the top 5% on Rule of Law, according to the World Bank.

However, there is a risk Hong Kong’s ability to be perceived as a leading global centre for Rule of Law is being undermined by the NSL, as a steadily growing number of respected jurists elect to leave their positions on the Hong Kong bench and companies choose to pursue commercial arbitration in Singapore, London or Paris instead; Singapore received 479 new arbitration cases in 2019 to Hong Kong’s 308.

While companies are not announcing a departure, they are quietly buying up office space and apartments in Singapore for their Hong Kong-based staff. Despite travel restrictions and local restrictions on viewing properties, 260 units were sold to foreigners in Singapore in the first nine months of 2020 and 75% of such buyers were from Hong Kong or Mainland China, according to PropNex Realty, Singapore’s largest private real estate company; this is lower than the same period in 2019 (306 units) but nonetheless notable, given the expected impact of the pandemic.

Putting the NSL to one side, businesses and their employees are also reportedly beginning to shift towards Singapore because of the city’s relatively relaxed quarantine policies.

Data safeguarding

Multinationals that use Hong Kong as a hub to store their Asia-Pacific customer or R&D data are also beginning to re-evaluate their position in the territory. Some worry that enforcement of the NSL could lead to requests from Beijing for user data, making Hong Kong a less attractive place for tech companies resistant to China’s data review policies.

According to Article 43 of the NSL:

“When handling cases of crimes endangering national security, the Hong Kong Special Administrative Region government police department for the preservation of national security may employ the various measures that the extant laws of the Hong Kong Special Administrative Region allow the police and other law enforcement departments to take when investigating serious crimes, and may employ the following measures… (1) search premises, vehicles, boats, aircraft and other relevant places and electronic devices that may contain evidence of an offence… (4) Requiring persons who published information or the related service providers to remove information or provide assistance.”

As a result, the NSL is seen to override Hong Kong’s original legal system, potentially making it a less attractive destination for Asia-Pacific headquarters. If this is the case, it is a significant blow to MNCs, for Hong Kong has developed into the region’s hub for submarine internet cables and satellites because of business’ enthusiasm for the territory’s geographical location, meaning that it will be hard for companies to find similar services elsewhere.

While perhaps no longer suitable for a regional headquarters, companies that transfer data in and out of the Mainland still see an opportunity in the NSL as it pertains to data management: It could expedite the development of the GBA data regime. However, that role could be moving out of Hong Kong too, for Guangdong Province recently announced that it plans to build a common data platform for the GBA and a data trading market in Shenzhen to regulate data travelling between the Mainland, Macau and Hong Kong more thoroughly.

The CBBC view

The introduction of the NSL has the potential to change the role that Hong Kong is most suited to play in the Asia-Pacific operations of multinational companies. There are now attractive alternative markets (not least, Singapore) within which an Asia-Pacific hub could be established. Whether Hong Kong can retain its status as a gateway into Mainland China will probably depend on the role given to it within the GBA. Decades of interest from multinational companies looking to establish an APAC hub in Hong Kong has resulted in it having the optimal infrastructure from which to direct a large, regional business; the business environment is supportive too – e.g., Hong Kong has a lot to offer companies looking to re-direct goods and services into China through the CEPA Agreement. However, Beijing appears intent on bringing Hong Kong in line with its neighbouring GBA cities and ending its special treatment, meaning that it is not inconceivable that cities such as Guangdong, which has excellent shipping and data management capabilities in its own right, could – in the future – impede on the territory’s status as a gateway to China.

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When it comes to technology, Guangdong is known for designing, building and selling things. However, there is a step before all of that in the tech industry’s value chain, and it is a step in which the province has traditionally been lagging. Beijing and Shanghai have long had an edge in basic scientific research, given the prevalence of leading universities in both cities focused on exactly this.

Still, Guangdong is not lacking in academic spirit or ambition. There are a number of well-established innovation hubs in Guangdong, such as Guangzhou’s “Science City,” which is home to some of the world’s biggest R&D-focused corporate names, or Shenzhen’s Nanshan Science and Technology Park, which hosts some of China’s biggest tech brands. At the core of the Greater Bay Area master plan is the ambitious “10 hubs” plan to build China’s answer to Silicon Valley, known as the Science and Technology Innovation Corridor (STIC).

Yet it has also become clear that Guangdong needs to raise its game in basic research. That is why the regional master plan has placed so much emphasis on collaboration between Hong Kong’s elite universities and their Guangdong counterparts, as well as research institutes such as Hong Kong’s Advanced Science and Technology Research Institute. Guangdong being the dynamic province it is, however, there was always going to need to be more than one route to scientific achievement. As a result, four major clusters of scientific excellence have been receiving resources and attention from authorities not only at the local and provincial level, but also at the national level.

Two of these clusters are located in the tier one cities of Guangzhou and Shenzhen, but not in established tech zones. In Guangzhou, a brand-new Science City is rising in the southernmost Nansha district, one of the province’s three national-level New Areas (the two others being Shenzhen’s Qianhai and Zhuhai’s Hengqin). In Shenzhen, the northerly Guangming area has been chosen for the next stage of the city’s scientific development.

The choice of Dongguan and Zhongshan for the two other Science Cities is perhaps more surprising. Both have grown over the past 20 years from rural backwaters into industrial powerhouses on the back of low-margin export-oriented manufacturing. Yet that is precisely why they were chosen for the next round of experiments in scientific progress: they have manufacturing bases that can be retooled for higher-technology outputs, and they have plenty of (cheaper) land available. In Dongguan, the Songshan Lake district has been the centre of scientific development, while in Zhongshan it has been the Cuiheng district.

Below, Greater Bay Insight gives a brief overview of each of these Science Cities.

The Nansha Free Trade Zone, Guangzhou, China

Guangzhou’s Nansha Science City

Nansha Science City was formally established in May 2021 when the city government signed a formal agreement for its establishment with the Chinese Academy of Sciences (CAS), the national scientific think-tank and academic governing body.

Essentially, the Nansha Science City aims to accomplish three major goals: to build on existing technological infrastructure, to construct new platforms for fostering innovation, and work to attract “high-end innovative talent” from home and abroad. With an initial focus on advanced scientific research in data processing, life sciences and marine biology, it has already seen construction started on the Marine Science and Engineering Laboratory on 600 acres of land with a total investment of over RMB 8 billion (£889.5 million).

With an initial focus on advanced scientific research in data processing, life sciences and marine biology, Nansha has already seen construction started on the Marine Science and Engineering Laboratory on 600 acres of land

Nansha district itself – once a site of alluvial sand deposits at the mouth of the Pearl River – has big ambitions to become a regional finance and technology hub. Its status as a national-level New Area gives the district certain leeway and expedited approvals for innovative ideas. This has enabled it to build a tech park not far from massive ocean-going transport and logistics facilities at Nansha Port, and a new business district is currently under construction that has already attracted commitment from over 260,000 enterprises, with 79 large-scale headquarters planned for the area.

Driving its scientific ambitions is the city government’s enviable tie-up with the Chinese Academy of Sciences (CAS), which has already set up no fewer than 44 national and provincial-level laboratories around the city.

At the core of Nansha Science City is the Pearl Science Park, which covers an area of 3.1 square kilometres and will feature five relocated projects and nine newly-established projects from CAS. It it scheduled to begin its first phase of construction this year and is expected to be completed by the end of 2022.

Among the CAS relocated projects are the South China Sea Institute of Oceanology currently located in Guangzhou’s Haizhu district, Guangzhou Institute of Geochemistry, Guangzhou Institute of Energy Conversion and South China Botanical Garden’s research department in Tianhe district, and Guangzhou Institutes of Biomedicine and Health in Huangpu district.

The Guangzhou college of the University of Chinese Academy of Sciences – the public university under the direct leadership of CAS with capacity to accommodate 4,200 postgraduate students in Tianhe district and 1,800 in Huangpu district in its Guangzhou branch – is also expected to move to the Pearl Science Park.

Established by Shenyang Institute of Automation of CAS, a new project named Guangzhou Intelligent Unmanned System Research Institute, focusing on developing an underwater robotics system, was expected to start construction this September. It has been given the role of an R&D base for China’s intelligent unmanned deep ocean systems.

Shenzhen’s Guangming Science City

Unlike Nansha, Shenzhen’s Guangming Science City is still in its infancy. The plan was only approved in April, although the founding began in January. However, its mission is no less important: to become the “core engine” of the tech-driven city’s basic scientific research effort.

Once home to dense residential zones and seven state-run production bases for dairy products, Guangming will now be divided into three major scientific clusters covering 99 sq km of land. The first and most important is focused on producing top-level scientific equipment. The other two are centred on Sun Yat-Sen University’s Shenzhen campus and one that contains research institutions and technology transformation platforms.

Six scientific infrastructure projects are being built in the first stage, including a material genomics scientific device platform; a space gravitational wave detection ground simulation device; a synthetic biology research facility; brain analysis and meningeal facilities; space, environment, and material effects research facilities; and precision medical imaging facilities. Among these, the third and fourth are already under construction.

The area is expected to forge strong links with Hong Kong’s academic institutions in basic research, including the University of Hong Kong and the Chinese University of Hong Kong, although no details have been disclosed so far regarding the form of cooperation.

Dongguan’s Neutron Science City

Construction on Dongguan Neutron Science City only began in March this year, but its most important components are already in operation after more than a decade of development: the Songshan Lake Materials Laboratory and China Spallation Neutron Source. Both have made use of high-level support and resources from CAS as part of a strategic plan to turn Dongguan, once a low-cost manufacturing hub, into one of the top clusters for comprehensive material science research in China.

Neutron Science City covers a land area of 53.3 sq km and is building accommodation for universities, research enterprises and large enterprises to attract some 600 scientists from around the world to carry out scientific research in all disciplines.

One of only four science devices of its kind (the other three are in the UK, the US and Japan), the China Spallation Neutron Source (CSNS) was formally established in 2011 by the Institute of High Energy Physics of CAS with an investment of RMB 2.3 billion (£256.1 million). Not far from the CSNS is the Songshan Lake Material Laboratory, jointly established in 2017 by the Dongguan government, as well as two CAS institutes with some RMB 12 billion (£1.3 billion) of planned investment on a 4.85 sq km land area. As of June 2021, the laboratory has 257 scientists working in it, including some from overseas.

Among the four newly-planned science city projects, Neutron Science City is the only one that is also part of the Science and Technology Innovation Corridor, the blueprint for China’s Silicon Valley within the overall masterplan of the Greater Bay Areas, which includes Songshan Lake as one of its “ten cores” in Guangdong.

Among the four newly-planned science city projects, Neutron Science City is the only one that is also part of the Science and Technology Innovation Corridor, the blueprint for China’s Silicon Valley within the overall masterplan of the Greater Bay Areas

Zhongshan’s Cuiheng Science City

Over on the western side of the Bay, Zhongshan’s Cuiheng Science City is smaller than the other three, covering just 18.27 sq km. However, it has big ambitions. Its development plan was unveiled in May based on a centre for “internationalisation and modernisation” that can accommodate up to 180,000 residents.

The planning of the area, released by the city government, didn’t include any specific names of the projects to be developed besides listing a few functional zones such as a technology and innovation zone, medical city, biotech park, science and education cooperation zone, and wetland zone. What is clear is the emphasis on fostering interaction with key regions across the Greater Bay Area, such as Qianhai, Airport New City and Ocean New City in Shenzhen, several of which are also part of the master plan for the Science and Technology Innovation Corridor in the Greater Bay Area.

Sitting at the end of the Shenzhen-Zhongshan Bridge-Tunnel project, the cross-bay connection due to be completed in 2024, the city is planning to position itself as a key node in the region’s traffic network. According to the plan, Cuiheng Science City will be within an hour’s reach of the region’s major air and rail hubs.

The plan has also listed a number of industry clusters, focusing on electronic information, smart manufacturing and biotechnology. No details regarding scientific research institutes have been specified.

Although these new science cities are being constructed separately, the intention to combine them into a powerhouse of scientific research for the technology-oriented Greater Bay Area is clear. Only time will tell whether they succeed in attracting the necessary talent, and combine their resources in a world-class competitive way.

This post originally appeared on our content partner Greater Bay Insight

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Juan Du is Associate Dean of the Faculty of Architecture at the University of Hong Kong (HKU) and a founding director of the Shenzhen Centre for Design. Her new book ‘The Shenzhen Experiment: The Story of China’s Instant City’ (Harvard University Press) emerged from her active involvement in the ongoing development and planning of the city.

It’s a study of a city planned to foster innovation, business and co-operation, as well as a new home for millions of migrant workers and their families from across the country.

Juan Du asks whether Shenzhen is the blueprint for a modern Chinese city, and what lessons have been learned since Deng Xiaoping supported the opening up of a Special Economic Zone (SEZ).

Paul French caught up with Juan Du on her commute between Hong Kong and Shenzhen.

PF: You’ve long shuttled between Beijing and Hong Kong but what first attracted you to Shenzhen?

JD: I was based in Beijing when I first started travelling to Shenzhen to work on the First Shenzhen Biennale of Architecture/Urbanism in 2005. Shenzhen’s so-called ‘villages within the city’ quickly caught my attention. Their unique street culture, diverse architectural and urban form, as well as the way people lived and inhabited the public spaces, were in such a stark contrast to the rest of the city.

These neighbourhoods struck me as being quite opposite to the outward image of Shenzhen – an overnight instant city without a history or culture of its own.

Shenzhen was certainly not a small fishing village, at least not during its past millennium of history.

I moved to the US in early 2006 to teach at MIT. However, my mind kept returning to China, and especially to Shenzhen. So I decided to accept an offer to teach at HKU and one motivation behind this move was Hong Kong’s proximity to Shenzhen.

Over the next 14 years, I worked with various communities in both cities. The initial fascination of Shenzhen’s urban villages gradually developed into a more comprehensive understanding of the overall city and the surrounding region.

PF: You challenge the idea of Shenzhen as a ‘blank canvas’ where nothing much existed before. What was Shenzhen, before it was Shenzhen? 

JD: While it has gone through many reincarnations throughout the past centuries, Shenzhen was certainly not a small fishing village, at least not during its past millennium of history.

Just prior to the designation as the City of Shenzhen in 1979, the approximately 2,000 square kilometres of land was known as Bao’an County, with a population of around 300,000 distributed across 2,000 villages, as well as small townships.

From serving as an important salt-production and administrative capital during the Han Dynasty to that of a major port on the South China Sea’s ancient maritime Silk Road, the area’s history was no less remarkable before it became Shenzhen.

During the more recent history, Bao’an County’s agricultural and aquacultural productions, such as lychees and oysters, were important exports in the 1950s.

From long-established agricultural, fishery, and sea-faring activities, to the industrial, commercial, and cultural enterprises of the past century, the existence of a productive population with deep connections to an extensive regional and international network absolutely impacted Shenzhen’s urbanisation into the city as we know it today.

PF: You talk about the ‘villages within the city’ – can you explain what these are and whether they are likely to survive?

JD: The ‘villages within the city,’ or ‘urban villages,’ are densely populated neighbourhoods where indigenous villagers built and own most of the properties. During the first decade of Shenzhen’s urbanisation, in order to meet the demands of a massive population of migrant workers seeking housing in the city, the villagers tore down their two-story houses and built up four- to eight-story tall mid-rise housing. These rentals gave the villagers sources of income and provided homes to the millions of migrants in the city.

There are approximately 300 urban villages in Shenzhen today. Collectively, they house around 10 million residents – about half the city’s total population. While the municipality has made efforts to demolish and redevelop urban villages, the population was too large and negotiations on property rights so complex and expensive, that only a handful of urban villages have been demolished and rebuilt.

In more recent years, Shenzhen has recognised the importance of these neighbourhoods as providers of affordable housing to the city’s working population, and the current urban planning policy is indicating a different approach – one of rehabilitation rather than total redevelopment.  Over the next decade, while the socio-economic characteristics will continue to change and evolve, I believe most of the urban villages in Shenzhen will remain.

PF: Shenzhen was so important to the early decades of Deng Xiaoping’s Reform and Opening Up movement, but now with so many cities being designated Special Economic Zone (SEZ), what, if anything, remains unique and important about Shenzhen?

JD: There have been hundreds of SEZ’s and new areas established in China since the 1980s, but not even one comes close to Shenzhen. This has not deterred more ongoing efforts of economic or industrial zone developments in China. Viewing Shenzhen’s role as an industrial or economic zone only would be a mistake for anyone wishing to understand or emulate its development.

Shenzhen started as a SEZ, and it quickly evolved into a complex and multidimensional city. While various pioneering commercial activities in the industrial zones of Shenzhen contributed to its unique development, this city of 20 million offers important lessons not only on economic or urban development, but also on the cultural and social importance of cities in general.

At the time of researching and writing my book, I found that the most unique aspects of Shenzhen are often contrary to the current model of industrial zone development, such as the role of the local indigenous population, the collective economic power of SMEs, as well as the importance of affordable housing for migrants.

PF: Many foreign companies with investments and factories in Shenzhen say it is the newness of the city – not just the buildings and infrastructure, but also that nobody has traditional ties to the city – that makes it a good place to do business. You butt up against far fewer social and cultural problems than you might elsewhere. Do you think this is true, even now after four decades of Shenzhen?

JD: I understand the sentiment. This newness of the city and lack of traditional ties is reflective of Shenzhen as a migrant city – from the government to the factory managers.  Everyone is in Shenzhen because he or she made a choice to leave their hometown to come to a new city. This motivational quality is one of the most overlooked unique aspects of the city.

In addition, Shenzhen was the first city in China to break the mould of state-owned enterprises with tenured employment. Not only was the city new to the arriving population, but the rules of work were also new.

PF: Shenzhen – an interesting experiment or a model city of the future?

JD: Shenzhen is an experimental city that can provide many valuable lessons for future cities.  However it is not a model city in the ways in which it has been generalised – that of central planning, government control, foreign direct investment, etc.

Shenzhen was not only China’s tentative test of a market economy, rather it was a critical experiment. The city was a site of cultural, social and political experimentations that were directly opposite to the way the rest of the country existed in the 80s and 90s.  I hope Shenzhen continues to be a critical experiment for China and the rest of the world.

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It seems like every city wants to be a World Finance Centre these days. In fact, many Chinese cities have more than one tall building with such a name on its door. In the Greater Bay Area, Hong Kong’s Central district springs to mind as the region’s leading financial area. Or, within Guangdong, perhaps the cluster of high-rises in Guangzhou’s Tianhe district or Shenzhen’s Qianhai could qualify for the designation.

But a World Financial Island? Now, that is different. There is only one of those in the Great Bay Area (GBA). It’s being built on a small corner of the Nansha New Area, on an island called Hengli.

This world financial island is one of three main special economic zones, built after Qianhai and Zhuhai’s Hengqin. The Nansha government is in charge of it and recently released its masterplan for the area, calling it the Nansha Pearl Bay Hengli Island.

The 589.26-hectare island is mostly green space at the moment with a flurry of construction going on as buildings rise from the dirt, but it is expected to become the “heart of Nansha”.

The local government has grand ambitions for it, which are enthusiastically supported by successive layers of government above it, from Guangzhou to Guangdong, and all the way up to Beijing.

Hengli will soon have a World Financial Island where once was farmland. Photo: China Daily

This is one of those places that will go from nothing to something big within the space of a few years. Not decades. Years. Five years ago, it was farmland. Today, it is what’s known as a “pre-modern city”. Five years from now, it will have its own international commercial bank, a futures exchange, an international conference centre, and a cluster of public facilities to support its growth, such as transportation networks, hospitals, schools and kindergartens.

Unlike any other special zone in the GBA, however, these institutions will benefit from remarkable privileges. Why? Because Hengli is the first “international financial island” in the country.

An island with dreams of being a global financial centre. If Hong Kong could do it, so can Hengli

Located roughly in the middle of Nansha, Hengli Island is considered to have the most potential among the four areas of the Pearl Bay, which includes Lingshan Island, Hengli Island, Jiaomen Estuary, and Huigu West District. It is almost perfectly centred within the GBA, equidistant from downtown Guangzhou, Shenzhen, Hong Kong and Macau.

Currently, it takes a bit of effort to reach Hengli. But soon it will be possible to reach all of these major cities in less than an hour, thanks to newly built rail lines.

Hengli’s northern neighbour, Lingshan Island, has been a successful role model to follow. The small island has attracted nearly a dozen large companies to set up their headquarters there, including the state-owned Yuehai Group, which recently bought two blocks of land here for RMB 700 million.

Lingshan did this by allowing large state-owned enterprises to directly invest and operate major infrastructure construction projects in the area since its launch in 2014. This accelerated its development.

Hengli is doing the same. China Communications Construction has so far invested a total of RMB 20.8 billion into the island.

More importantly, Hengli will take advantage of a list of essential policies by the higher-ups that should see it grow even faster – and it has twice Lingshan’s land area.

The most important of these gifts is Hengli’s official designation as a “world financial island”. The concept first surfaced in 2017, in a formal cooperation agreement between the Nansha Government and the International Finance Forum (IFF), a body established by the central government in cooperation with the United Nations Development Programme.

The IFF may have an innocuous-sounding name, but it is a crucial institution in Beijing’s eyes, as it aims to provide a dialogue channel for international financial cooperation and innovation.

Hengli has been chosen to be the IFF’s permanent conference venue. A new operation centre is being built for it on a large plot of land, with RMB 3.5 billion of investment. Its detailed construction plan will be finalised in September and construction is likely to begin in November.

That is what is known in the real-estate business as a “cornerstone tenant”. But it is not all. Nearby, a whole new business district is going to house branches of some of the country’s major financial institutions. They span shipping finance, fintech, financing and leasing. And at their heart will sit perhaps the GBA’s most ambitious financial project of all: the GBA International Commercial Bank.

This will not be just another bank, with a GBA nametag on it. It will be a trailblazer for cross-border financial flows.

Wang Fuqiang, head of the GBA strategic research team of the China Centre for International Economic Exchanges, says, somewhat understatedly, that the bank will “enjoy a certain degree of autonomy in currency convertibility”.

Think of it more like a regulatory body than a bank, per se. It will be able to manage the foreign-exchange quotas of companies, banks, and other financial institutions, which is currently run by the State Administration of Foreign Exchange.

The government is vetting eligible international commercial banks to serve as the founding institutions operating under the GBA Bank, which will channel funds to them from the government and the private sector, including investors from Hong Kong and Macau.

The Futures Exchange, meanwhile, is expected to lead a pilot zone of “green financial reform and innovation,” and will initially be trading carbon emission-based futures products. It was part of the GBA masterplan, and a detailed action plan for the construction will be released later this year.

Hengli is not the only space in Nansha that has financial dreams. The entire zone has already been testing reforms in the sector, with policies designed to boost cross-border finance flows. Recently these included two-way RMB loans and cross-border asset transfers, with volumes having reached RMB 300 billion already. This is tiny compared to bigger jurisdictions, but it is a promising start.

Like bees to a honeypot, financial companies have been drawn to Nansha for the past five years. Official figures show 6,439 financial enterprises have settled in Nansha since it was officially declared a Free Trade Zone in 2015. Some of them are global names, like JP Morgan Futures, as well as Chinese heavyweights such as Postal Savings Bank of China (PSBC) Consumer Finance, and Fosun Health Insurance Company.

It is not all about business. The Nansha government is addressing lifestyle issues, too. It is investing RMB 15 billion to improve the healthcare facilities in the area, including building a branch of the dentist hospital of Sun Yat-Sen University, and expanding Hengli’s No.3 People’s Hospital. On the west side of the island, it is developing high-end living communities.

But hasn’t this all been done elsewhere, one might wonder?

Not really. Nansha is positioning itself differently. For instance, the scope of its sister special economic zone, Qianhai, is to cooperate with Hong Kong and test reform measures based on the way the SAR works. Hengli is circumventing all that and aiming to become a standalone international finance centre in its own right.

This is not to say that Nansha will be trying to eat Hong Kong’s lunch. It is also working hard to support Hong Kong in mutually beneficial ways, such as expanding the wealth-management business in both jurisdictions.

An island with dreams of being a global financial centre. If Hong Kong could do it, so can Hengli. Watch this space.

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