In August 2019, the Chinese Central Government issued a policy document outlining reform and development guidelines for Shenzhen which supported the implementation of the Guangdong-Hong Kong-Macao Greater Bay Area (Greater Bay Area, or GBA) Development Plan. This issuance followed the release of two documents by the Guangdong Government in July – the Implementation Plan for the Outline Development Plan for the GBA and a Three-Year Action Plan for Building the GBA (2018-2020).

The GBA Development Plan could warrant closer attention from entrepreneurs in Hong Kong. While there has been other regional economic development plans in the past, most notably the Pearl River Delta Economic Zone, experts point out that the GBA is fundamentally different.

“This is the first time that a regional development plan is directly endorsed and led by the central government of Beijing,” says Nicholas Kwan, Director of Research at the Hong Kong Trade Development Council (HKTDC) in an interview with American Express. “Under GBA there is a formal management structure led by Vice Premier Han Zheng, one of the seven Politburo members. Key ministries are also directly involved.”

Kwan says that for the first time, two of mainland China’s Special Administrative Regions (SARs) namely Hong Kong and Macao are under a Chinese economic plan. The objective of having high level political involvement however is not to subsume the SARs into China’s central economic planning but is to facilitate the development of economic flows among Guangdong regions and the SARs.

“The purpose is to coordinate the development of the different systems, each government looking after their own areas while ensuring that the borders do not cause disruptions to flow of people, product, capital, services and information,” says Kwan.

“For example, by allowing the custom authorities of both sides to set up a system of straight through processing, products could be identified under seal and cross border without being checked twice. Also there could be special visas granted to residents or foreigner-residents of the regions to allow them to travel freely within the regions.”

Intellectual property, tax, and financing

Kwan says work is being done to address some of these concerns. “While Hong Kong and mainland China will maintain their respective legal systems, Hong Kong entrepreneurs might be able to enjoy Hong Kong levels of protection in terms of intellectual properties and commercial disputes settlements through the setup of Hong Kong arbitration centers on the mainland.”

Tax regulations for Hong Kong residents are also being relaxed. For example mainland Chinese individual income tax subsidies will be granted to eligible talents working in the region so that they do not have to pay more than what they would have to at home.

The GBA may help not only entrepreneurs thinking of expanding or developing in the GBA region. Those seeking global expansion may turn to sources of financing from within GBA. According to HKTDC, in Shenzhen alone, there are nearly 4,000 active venture capitalists.

“China is investing more than US$120-US$130 billion to the rest of the world each year, 60% is destined for or routed through Hong Kong. The largest single source of investments is from Guangdong. The GBA is a major source of outward investment for the region and rest of the world,” says Kwan. “They are hungry for investment opportunities especially under current trade environment. A lot of Guangdong-based investors are looking for more meaningful returns and diversification of investments.”