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.

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

The post Are these ‘Science Cities’ set to be China’s Silicon Valley? appeared first on Focus - China Britain Business Council.

Talk to Sir Douglas Flint for any length of time about China and there’s one word you will hear often: ‘opportunity.’

The Standard Life Aberdeen chairman has spent much of his career working in and around China, both in his current role and as finance director, and then chairman of HSBC, a position he occupied from 2010 to 2017.

Sir Douglas acknowledges the present strains in the relationship between Western countries and China. But he says there have been periods of frostiness in the past; this time around, the mutual benefits that stem from trade and investment flows between the UK and China are clearer to both sides.

“In terms of the ambition of both countries to have a constructive relationship in areas of shared interest, that continues to be the case, he says. “At the more micro level of individual businesses, dialogue continues to take place in terms of opportunity.”

And where might those opportunities lie? Sir Douglas points to his own industry, financial services, as one area.

“China’s banks have…limited networks around the world, whereas the big international banks from the US and Europe have considerable experience in handling cross border trade and investment flows,” he says. “If you choose your segments carefully there are huge opportunities.”

Asset management is an area where the prospects are strong, both as China modernises its domestic industry and as China’s vast household savings are invested overseas

Asset management, the speciality of Sir Douglas’s current firm, is another area where the prospects are strong, both as China modernises its domestic industry, and potentially in the future when more of China’s vast household savings are invested overseas.

“I think there are big opportunities, not to dominate the sector, but to have a meaningful portion of the small piece of the market that will be available: That will still be a large opportunity,” he says.

Beyond his own sector, Sir Douglas puts forward health and technologies related to coping with climate change as areas where British companies have the potential to do well in China.

His optimism extends to the city where Sir Douglas has spent much of his working life – Hong Kong – especially when he talks about the Greater Bay Area, a region with a similar population to that of the UK and the potential, he says, to overtake it in terms of economic size within the next decade.

“It’s the hi-tech, hi-GDP per capita area of China,” Sir Douglas says. “If it were a country on its own it would be one of the most exciting places in the world for businesses to focus on – so I think it’s a huge opportunity.”

Sir Douglas is more cautious when discussing Hong Kong politics. Noting that social stability is important for business, he says “time will tell” whether the Chinese government’s current approach is the right one.

“The value of Hong Kong to both the West and China is, I think, undoubted. And I think it will continue to have a different but strong future,” he says. “It will be differentiated from China, which is its great strength; but it is part of China and is a gateway to China, which is what makes it so valuable.”

When it comes to other political issues that UK businesses can face when operating in China, Sir Douglas’s suggests businesses stick to doing what they do best

When it comes to other political issues that UK businesses can face when operating in China, Sir Douglas’s advice – offered in his calm and measured Scottish tone – is for businesses to stick to doing what they do best.

“It’s not our job either to form policy or to comment on policy,” he says. “I think the most important contribution that business can make is encouraging policy makers to have a clarity of vision and a framework for engagement with a country like China…It’s very difficult to think that you can invest meaningfully if you’re worried that the policy could change with every administration or in terms of every event that happens within the context of the relationship.”

Asked what British businesses should do when it comes to operating in controversial areas of China, Sir Douglas is clear.

“I don’t think it’s for business to hashtag support for things in the vast majority of instances; I think you do it through your actions,” he says, adding that this can be done by, for example, companies ensuring supply chains are in accordance with their values.

The importance of a sophisticated approach to China is key for Sir Douglas when it comes to the broader bilateral relationship. He says the government’s Integrated Review of the UK’s defence and security that’s currently underway is an ideal time to take stock.

“Yes I do think we need a strategy [towards China],” he says. “I think we need to have our own policy that splits the relationship into areas where we absolutely need to work in cooperation, and other areas where we want through engagement to change the way China engages with the rest of the world.”

The UK could find a post-Brexit role as “an honest broker” between the US, the European Union and China

Regarding the possibility of a free trade agreement, Sir Douglas is cautious, suggesting it would be a difficult negotiation for the UK given China’s much greater size. But he adds that the UK could find a post-Brexit role as “an honest broker” between the world’s three great economic powers – the US, the European Union and China.

Plenty of opportunity – that word again – then. Sir Douglas has some final words of advice based on his years of experience in China.

“You learn that there are ways of dealing with China where you can have an impact, but that is done through advocacy and engagement and behind closed doors,” he says. “It’s not done by shouty politics, because that just doesn’t work.”

The post Sir Douglas Flint on the opportunities in China’s finance sector appeared first on Focus - China Britain Business Council.

TP: Can you introduce yourself, where you were born, grew up and educated?

ML: I am a mother of three sons, born and raised in Hong Kong. My entire education was in Hong Kong, from primary school to my Masters of Law in the University of Hong Kong. I have never lived in another country.

TP: Can you tell us about your career progression?

ML: I was trained in what was formerly known as Johnson Stokes & Master (now Mayor Brown), the biggest local law firm at that time. I then joined my principal to set up our own firm one year after qualifying as a solicitor. In 1991, in anticipation of the possibility of immigration after Hong Kong was returned to China in 1997, I joined the US firm Coudert Brothers.

From there, I moved on to start up a local firm with my partner Peter Carey whom I lost to a traffic accident in 1998. In 1999, I joined DLA Piper and helped that to grow from a three partner office to a multi-discipline practice with offices in Shanghai, Beijing and other Asian countries. After 17 years in DLA Piper, I joined the US firm Winston & Strawn with a view to develop its corporate practice.  In 2017, I joined Withers, also with the mission of developing corporate practice.

Throughout 40 years in the profession, I have principally been a corporate /commercial lawyer, though also have experience in real estate and private wealth management. I see myself as a trusted advisor who can assist clients in a wide range of matters.

TP: You were involved in the first-ever JV in 1979 – can you tell us how that came about and how it took place?

ML: Maxim’s Group, the Hong Kong investor in the JV, was and still is a client and I assisted them in the set-up of the first JV in 1979.

TP: Have you seen a shift in recent years from inbound (CN) investment to outbound?

ML: I would not consider it a shift but, as I anticipated many years ago, China has developed from an inbound capital receiver to also providing outbound capital.

TP: What are some of the mistakes that companies still make when dealing with China?

ML: I think some of those working with the Chinese still make the mistake of underestimating the strength of China – both in terms of commercial sophistication and financial power.

TP: How do the issues affecting Hong Kong at the moment affect China’s image? And will this affect how businesses invest in China?

ML: It really depends to whom you are asking the question and what information they have received from the media. From my perspective, China has been very constrained and has not interfered with or even given direction to what should happen in Hong Kong. Despite the provocation, China is determined not to have a repeat of June 4th and those who are waiting for the People’s Army to come into Hong Kong will be disappointed. However, if you discuss the situation with people outside Asia who have not got the full picture from the media, they would think that China has already taken over Hong Kong. The people in China are robust about the country’s future. What is happening in Hong Kong should not affect business investment in China.

TP: The Greater Bay Area is clearly a huge regional development in China, what kind of opportunities do you think it will offer to international business that wants to get involved. 

ML: Much anticipated by real estate developers, industrialists, and investors alike, the Greater Bay Area (GBA) has already received plenty of attention for its ambition to transform nine mainland cities and two special administrative regions into a new Silicon Valley-type technology and innovation hub. To help the region become more economically valuable, the initial plans are for it to become an important global centre for advanced manufacturing, and to also focus on innovation, financial services, transport and logistics, trade, and tourism and leisure. These are areas where the GBA is already strong, with different cities in the region already establishing their own unique strengths. Hong Kong is known as a world financial centre; Shenzhen is known as ‘China’s Silicon Valley’ because of its innovation and start-up culture; Guangzhou is known for manufacturing and as a logistics hub; whilst Macau and Zhuhai are known for leisure and tourism.

I think some of those working with the Chinese still make the mistake of underestimating the strength of China – both in terms of commercial sophistication and financial power.

Further to this, in January 2017, China and Hong Kong agreed to build the Lok Mau Chau Loop Technology Park. Located in Hong Kong, right on its border with Shenzhen, the park will allow Hong Kong to tap into Shenzhen’s booming innovation and start-up ecosystem while also maintaining access to Hong Kong’s strong legal system and business environment.

The initiative will have an international impact beyond the GBA, as the region is located on the maritime section of China’s ambitious Belt and Road Initiative.

TP: As a female business leader, what challenges and obstacles have you personally overcome in your career and how did you deal with them?

ML: I am often asked this question and I have to say that I have had very few challenges or obstacles as a woman. With domestic help and family support, I have always been able to maintain dedication to my work and career while raising the family. Woman are not in the minority in the legal community in Hong Kong and there is no strong discrimination against women.

TP: What advice would you give young female entrepreneurs or those trying to further their careers?

Women should not consider themselves any different from men. Women have to believe in equality first. On the other hand, it is important to have a clear understanding of one’s priorities. Thus, if a young female entrepreneur wishes to dedicate herself to her family and take a break from her career, she should do so and should feel no stigma. It does not make sense for a woman to try to do both tasks at the same time, putting herself under immense pressure while struggling to succeed with both tasks.

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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.

For more information sign up to the GBA newsletter or contact CBBC’s Torsten Weller

The post Nansha’s Hengli: World Financial Island appeared first on Focus - China Britain Business Council.

Last year, China celebrated the 40^th anniversary of the economic reform that accompanied its opening-up policies. Deng Xiaoping’s decision to swap Soviet-style planning for market forces and free enterprise has created one of the biggest economic success stories in modern history. It has transformed China from an impoverished developing country into the second-largest economy on earth.

It has also reshaped China’s economic geography. Previously poor and neglected areas have seen the rise of urban megalopolises and manufacturing hubs. Former fishing villages like Dongguan and Shenzhen have morphed into industrial powerhouses and become global leaders of innovation and technology.

The Greater Bay Area Outline Development Plan (ODP) that was published last February is set to continue this transformation and proposes a far-reaching overhaul of the Pearl River Delta’s infrastructure and administrative set-up to expand existing strengths and pave the way for further economic expansion.

Five key advantages of the GBA

The Greater Bay Area (GBA), which covers the nine Chinese mainland prefectures of the Pearl River Delta plus the two Special Administrative Zones (SAR) of Hong Kong and Macau, has been the traditional trading hub that connects China to the rest of the world.

For centuries, the trading posts at Lumen and Guangzhou (Canton) have welcomed traders from Europe, the Middle East, Africa, India and South East Asia. Even through the relatively isolationist Mao era, the Canton 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.

Besides its historical significance, the region combines five geographical and structural advantages:

1. The GBA hosts the world’s fourth, fifth, and seventh largest container ports and has access to the world’s busiest trading route with a seaborne trade volume of £2.74 trillion in 2016, 23 percent of global trade on the seas.
2. Together with a sprawling network of waterways, the region now has 38,414 miles of roads and a railway network the size of Greece’s, providing convenient and easy access to China’s vast consumer market.
3. The GBA is the world’s workbench. Factories in the GBA contribute over 10 percent of China’s manufacturing output. Adding value of over £390 billion in 2017, the region produces more goods than South Korea and almost twice as much as the entire UK.
4. The region hosts some of most innovative and technologically advanced companies on earth. In 2017, nearly 14 percent of all Chinese patents were filed by companies based in the GBA. Shenzhen alone accounted for over 40 percent 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 the third rank on the Global Financial Centre Index, Shenzhen and Guangzhou, which come in at 9^th and 23^rd respectively, offer two new emerging finance hubs.

Breaking down barriers to growth

Unlike greenfield projects like the Xiong’an New Area in the north of China, the main focus of the ODP is the removal of administrative barriers between the nine mainland prefectures and the Special Administrative Zones of Hong Kong and Macau. Capital investment from Hong Kong in particular has been crucial in stimulating growth in the early years of China’s reform period. Yet the SAR’s special status and the differences in legal systems and professional standards have so far prevented many businesses from expanding into mainland China.

The GBA will change that by creating a unified regulatory environment that would lift regulator standards on the mainland to global standards and allow Hong Kong-based financial and professional service providers to expand into the Chinese market.

The initiative to improve access and increase service trade between the three jurisdictions relies on four interconnected measures:

The GBA will create a unified regulatory environment that would lift regulator standards to global standards

Freedom of movement between the two SARs and the mainland will be expanded.  This will extend a number of the civil rights of mainland citizens to Hong Kong residents. These include the right to purchase property without preconditions and to open bank accounts without a resident’s permit.

The Guangzhou government is also accelerating plans to recognise Hong Kong professional certificates that would allow accountants, financial analysts, and lawyers to carry out their work within the Greater Bay Area.

Rules for financial service providers will be harmonised across the region. Fundraising and listing for businesses is set to be made easier and more foreign institutions will be allowed to open subsidiaries on the mainland. The financial centre in Guangzhou’s Nansha district will launch a new exchange and combine advanced FinTech and digital currency trading with traditional wealth management. The ultimate goal is to remove almost all capital controls within the GBA to ensure efficient capital allocation across the delta.

An insurance connect scheme, modelled after the already existing stock connect between Hong Kong and Shenzhen, will allow international insurance companies to freely operate within the GBA. Hong Kong and Macau-based insurances companies will be allowed to set up after sales offices in the three special economic zones of Qianhai (Shenzhen), Nansha (Guangzhou), and Hengqin (Zhuhai). Furthermore, the insurance connect foresees the establishment of a joint trading platform for medical insurances and other insurance products.

A joint space for research and innovation. Since 2018, institutions in Hong Kong have been eligible for government research grants issued by the Chinese central government. Businesses from Hong Kong will also be encouraged to invest more in R&D in both Hong Kong and the mainland. Currently, less than half of R&D expenditure in the SAR is borne by private business, whereas their Chinese counterparts in the rest of the GBA are responsible for well over 90 percent of local R&D spending.

The plan for the Greater Bay Area will cement the region’s advantages and transform the delta into the economic heart of South East Asia. If successful, the plan could also make the region once more a model for reform in China, serving as a blueprint for market reforms in other parts of the country.

Removing regulatory barriers to service providers and raising standards to global levels whilst also pioneering cutting-edge technology and innovation has the potential to turn the GBA into a global leader in the fourth industrial revolution.

For more information on the GBA or to receive a copy of CBBC’s GBA report contact Torsten Weller on torsten.weller@cbbc.org

The post The Greater Bay Area will be the world’s largest economic zone appeared first on Focus - China Britain Business Council.

Shenzhen is often called China’s Palo Alto, the city at the heart of Silicon Valley, a reflection of the way in which the Greater Bay Area is often called China’s Silicon Valley. Yet what many observers do not realize is that there is, in fact, a blueprint for China’s Silicon Valley within the overall masterplan of the Greater Bay Area. It is known by a name that only a bureaucrat could have come up with: the Guangzhou-Dongguan-Shenzhen Science and Technology Innovation Corridor (or STIC).

The three cities at the heart of southern China’s tech industry Guangzhou, Dongguan and Shenzhen need little introduction, even if the plan that links together their hi-tech capabilities does.

The STIC is a 180 km belt of districts and hi-tech parks that runs down the eastern side of the Bay. It begins at the Guangzhou-Foshan border, passes through central Guangzhou, winds its way down to Nansha, cuts across to Dongguan’s Songshan Lake, and then heads south again to end in Shenzhen, a city literally made up of hi-tech zones.

The innovation corridor is connected by transport arteries: the Guangzhou-Shenzhen Expressway, the Guangzhou-Shenzhen coastal highway, the Guangzhou-Dongguan-Shenzhen Intercity Rail and the Guangzhou-Kowloon Railway. These are expanding and developing at a rapid pace.

Initiated in 2017, the masterplan for this “innovation corridor” is modelled not only upon Silicon Valley, but also on the Boston-Cambridge-New York tech hub on the US east coast, as well as Japan’s Tokyo-Yokohama-Kobe-Tsukuba tech hub. These innovation and economic centres are built on clusters of industries that are concentrated together with universities, research institutions, and a keenly interested pack of venture capitalists.

As shown in this table, the Greater Bay’s innovation plan has some major ambitions for the coming decade:

Source: thePaper.cn

Already, there’s no shortage of superstar companies already in the STIC. Tencent, Netease, Huawei, ZTE, DJI, OPPO, Vivo – the list goes on. The corridor has a combined annual industrial output of over RMB 1 trillion.

As with many, if not all, Chinese masterplans, numbers are a key component of the overall blueprint. This one is based on a geographic layout referred to in official documents as “One Corridor, Ten Cores and Multiple Nodes.” Let’s break them down.

 One Corridor

Taking inspiration from the US west coast’s Highway 101, which runs through the states of California, Oregon and Washington, and the US east coast’s Route 128, the “One Corridor” refers to the 180-kilometer belt running through Guangzhou, Dongguan and Shenzhen. It is similar in size to Silicon Valley.

Ten Cores

These are “innovation clusters” along the Corridor, with four in both Guangzhou and Shenzhen, and two in Dongguan. They are:

1. Guangzhou University Town, a high-tech talent innovation and entrepreneurship base and the core platform for scientific and technological cooperation in southern China. Supported by no fewer than 10 university campuses on a gigantic island, it is the region’s core research and development force. It focuses on information technology, new materials and high-end manufacturing, creative culture and bioscience.
2. Guangzhou Pazhou Internet Innovation Cluster aims to build up an internet industry headquarters for the region, a destination for global internet investment and a gathering place for international high-end talent.
3. Sino-Singapore Guangzhou Knowledge City, an industrial zone, focuses on bio-medicine, electronic information, new materials and other knowledge-driven industries.
4. Guangzhou Science City aims to become the regional technology and innovation centre, led by strategic emerging industries. Its focus is on electronic information, new materials, and the bio-medicine industry. The city’s goal is to build a start-up ecosystem with a high concentration of innovation elements.
5. Dongguan Songshan Lakeaims to build a global science and technology park and an ecological demonstration town. It focuses on the development of high-end electronic information, robotics, biotechnology, new energy, and modern service industries.
6. Dongguan Binhaiwan New District focuses on modern service industries, marine bio-medicine, intelligent equipment, and information technology industries. The new district is an important node on the Corridor that serves as a pilot zone for the integrated development of the services industry.
7. Shenzhen Airport City aims to develop an international exhibition trade and service industry and build a world class aerotropolis. It will be focussed on the aerospace industry and intelligent equipment.
8. Shenzhen High-Tech Zone focuses on new materials, electronic communication, digital audio-visual equipment and biological medicine industry. It aims to build a national-level demonstration zone of intellectual property rights and national high-tech industry standardization exhibition zone.
9. Shenzhen Banxue Technology and Science City will develop communications equipment and 5G industry by utilizing the technology and talent spill-over effect from leading enterprises like Huawei.
10. Shenzhen International Biological Valley focuses on the bio-medicine and bio-science industries. It integrates bio-technology and information technology, aiming to build up a world-leading bio-technology innovation centre.

• Source: cn

Multiple Supporting Nodes

These refer to no fewer than 37 industrial parks scattered along the Corridor. 

The challenges

Compared to well-established tech hubs in the US or Japan, the Greater Bay’s STIC still needs to overcome some challenges. Some are fairly obvious and just require time and organic economic growth. Others are more specific to the region and are being addressed by policymakers as a matter of urgency. They include:

• Education and human resources: There is a lack of high-quality universities and research institutes, technologically innovative companies, high-level talent and sufficient investment for basic research.
• Coordination: Policies need improvement in investment incentives, administrative approvals, land transfers and the flow of human resources. There is too much overlap between various jurisdictions in these areas. Similar industrial structures cause overly competitive product development, deterring the effective growth of industrial value chains.
• Collaboration: The higher education institutes, research institutions and enterprises have not yet established smooth collaborative efforts in innovation, resulting in ineffective allocation of technological resources and prematurely interrupted commercialization of research results.
• Capital allocation: The development of the venture capital industry is also immature, needing better integration into the process.
• Urban planning: Environmental standards vary between urban and rural areas. Messy planning for land usage and inadequate living-working conditions are prevalent.
• Transport: Highways are still the main commuting option among towns and cities along the Corridor. This is causing bottlenecks. The Guangzhou-Shenzhen Expressway, for example, was designed for 60,000 vehicle trips per day, but on peak days it is hitting 120,000 vehicle trips per day.

Building the infrastructure

Infrastructure is the challenge being addressed with the most gusto. According to the masterplan, the Corridor will “construct a comprehensive transportation network”. Airports are being upgraded and new ones are being built. Hi-speed railways are being laid out at record speeds. Roads are being widened and networks improved.

The goal is for everyone within the Greater Bay’s STIC to be “10 minutes to the highway, 45 minutes to each city’s central business district and 60 minutes to the airports at Guangzhou or Shenzhen.” Will this infrastructure boom accelerate the STIC to the point it can seriously challenge the world’s leading tech hubs for pre-eminence? And will the STIC become a magnet for talent and a breeding ground for world-leading innovation? That’s definitely the plan.

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