China’s Greater Bay Area Has Real Economic Power

The government’s plan to develop a massive urban cluster in southern China reflects the growing heft of China’s regions.

Expert comment Updated 14 October 2020 Published 20 September 2018 2 minute READ

Dr Tim Summers

Former Associate Fellow, Asia-Pacific Programme (based in Hong Kong)

The Shenzhen skyline seen from Kwu Tong in Hong Kong. Photo: Getty Images.

The Shenzhen skyline seen from Kwu Tong in Hong Kong. Photo: Getty Images.

On 23 September the first high-speed trains will depart a gleaming new station in Hong Kong for cities across the rest of China. Later in the year a new bridge connecting Hong Kong, Macao and Zhuhai (on the western bank of the Pearl River) is due to open to traffic. These expensive and somewhat controversial projects mark the latest infrastructure links between Hong Kong and its hinterland.

They come at a time when growing attention is being paid to the Greater Bay Area, a Chinese government plan to develop further a massive urban cluster in southern China, including Hong Kong, Macao and the nine most developed cities in the adjacent Guangdong province.

In Hong Kong, advocates of these developments see them as marking a new chapter in connectivity and creating opportunities for commercial development. Opponents see instead an ongoing effort to integrate Hong Kong further into China.

But the Greater Bay Area and infrastructure connectivity is about much more than Hong Kong. This is part of the ongoing development of China’s regions, some of which are now becoming as weighty as major national economies across Asia. The GDP of the Greater Bay Area is $1.5 trillion, similar to that of South Korea, and with a population of some 67 million, it is one of China’s richest regions on a per capita basis.

As I set out in a new book, China’s Regions in an Era of Globalization, economic integration between Hong Kong and its hinterland entered a new phase from the late 1970s, as parts of coastal China began to integrate intensively into the global economy.

The production networks that emerged helped to transform China’s economy, turned cities in Guangdong province such as Shenzhen and Dongguan into the ‘factory of the world’, and boosted Hong Kong’s competitiveness and economic growth. Guangdong still accounts for 29 per cent of China’s trade in goods and for a whopping 47 per cent of its 2016 trade surplus.

But the region has not been content to remain just the ‘factory of the world’. Especially after the global financial crisis, many parts of Guangdong’s economy have moved rapidly up the value chain and become home to some of China’s most globally competitive companies. Many areas of China still have a way to go in this, but the transformations in southern China are real, especially in Shenzhen, and not given the attention they deserve from many businesses in the West.

The Greater Bay Area concept represents an effort by the Chinese government to build on this by enhancing the competitiveness of this region’s economy. In line with the underlying concept of China’s regional policy since the 1980s, that aim is not to integrate or homogenize the different parts of the region. Instead, the goal is to take advantage of the different strengths of cities across the Greater Bay Area, encouraging collaboration which will use the comparative advantage that different cities or companies bring to the table.

This will not be easy to deliver. In contrast to the casual assumptions of centralized decision making in China, the country’s provincial and municipal governments and business elites shape the development and implementation of economic and commercial policy. And the natural tendency of cities in China to compete with each other, rather than cooperate, makes plans such as the Greater Bay Area difficult to implement. In particular, the polarized visions of Hong Kong’s future make it hard for Hong Kong to work out how to engage.

But whatever the politics or policy framework, the dynamic and innovative nature of much of the Greater Bay Area economy means that this is a part of China which will further increase its influence on the global economy. Policymakers and businesses globally would do well to pay more attention to this powerhouse of China’s economy.