25 February 2019

A new blueprint for growth — Analysis of the Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area

Author: Wu Ye, KWM International Center

After much anticipation, the long-awaited Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area (the “Outline”) was released on 18 February 2019. The Outline follows the signing of the Framework Agreement on Deepening Guangdong-Hong Kong-Macao Cooperation in the Development of the Greater Bay Area on 1 July 2017. Issued by the Central Committee of the Communist Party of China (CPC) and the State Council, the Outline provides guidance for the current and future cooperation and development of the Guangdong-Hong Kong-Macao Greater Bay Area (the “GBA”). It not only makes clear the role and position of each city within the GBA, but also sets the objectives of the plan covering the period from now to 2022 in the immediate term, and extending to 2035 in the long term. Released in the context of emerging trade protectionism, intense trade frictions, and a potential slowdown in the development of the global economy, the Outline gives direction to the development of the GBA and, importantly, provides a new model for China’s growth and economic development.

This article sets out a brief summary of the Outline and its vision for the core GBA cities.

I. Overview of the Outline

The GBA consists of the Hong Kong SAR, the Macao SAR, as well as the municipalities of Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen and Zhaoqing in the Guangdong Province, covering a total area of 56,000 square kilometres with a combined population of approximately 70 million at the end of 2017. As one of the most open and economically vibrant regions in China, the GBA plays a significant strategic role in the overall development of the country. It is foreseeable that a world-class cluster of cities will gradually take shape, matching or even surpassing the world’s three major bay areas, namely New York, San Francisco and Tokyo.

The Outline was jointly prepared by the relevant departments of the central government together with the governments of the Guangdong Province, Hong Kong SAR and Macao SAR, and consists of 11 chapters and 41 sections. The Outline sets out the vision of developing an international innovation and technology hub, expediting infrastructural connectivity, building a globally competitive modern industrial system, promoting ecological conservation, developing a quality living area for work and travel, strengthening cooperation and jointly participating in the Belt and Road Initiative, and jointly developing Guangdong-Hong Kong-Macao cooperation platforms. The Outline sets forth an overall plan for the strategic positioning, basic principles, development objectives and spatial layout, marking the new phase of GBA construction and development. Going forward, it is anticipated that Guangdong, Hong Kong and Macao will continue to develop and release supporting policy documents.

II. Highlights of the Outline

1. Positioning and Key Areas of Core Cities


Hong Kong

Positioning Area Major Supporting Measures
  • International financial centre, shipping and trade centre, as well as an international aviation hub
  • A global offshore RMB business hub
  • An international asset management centre and a risk management centre
  • An international legal and dispute resolution hub in the Asia-Pacific region
Finance
  1. offshore RMB business
  2. international asset management and risk management businesses
  3. support the engagement of Hong Kong’s private equity funds in the financing of innovation and technology enterprises in the GBA
  4. allow eligible innovation and technology enterprises to secure listing in Hong Kong for capital financing
  5. support Hong Kong’s institutional investors in raising RMB funds in accordance with the relevant regulations in the GBA for investment in the capital markets of Hong Kong
  6. support Hong Kong’s institutional investors in participating in the investment of domestic private equity funds and venture capital funds
  7. support Mainland and Hong Kong insurance institutions in developing cross-border RMB reinsurance business
  8. support Hong Kong to set up an internationally recognised green bond certification institution
Trade, commercial
  1. support Dongguan’s cooperating with Hong Kong in the development of the Dongguan Binhaiwan New District
  2. support Hong Kong and Foshan in offshore trade cooperation
Shipping and logistics
  1. support Hong Kong’s development of high-end shipping services such as ship management and leasing, ship finance, marine insurance as well as maritime law and dispute resolution services
  2. support Hong Kong’s development of high value-added freight, aircraft leasing and aviation financing services, etc.
Professional service
  1. leverage Hong Kong’s status as an international financial centre, and provide financing and advisory services for Mainland enterprises “going global”
  2. support Mainland enterprises in establishing capital operation and corporate treasury centres in Hong Kong for carrying out business operations such as financing and financial management, as well as enhancing risk management
  3. to develop a system of modern service industries, including accounting and auditing, legal and dispute resolution services, management consultancy, testing and certification, IP, and construction and related engineering works 
Innovation and technology
  1. promote the integration of Hong Kong into the national innovation system and pursue the development of the “Guangzhou-Shenzhen-Hong Kong-Macao” innovation and technology corridor
  2. support the development of major carriers for innovation such as science and technology industrial parks; take forward the development of Partner State Key Laboratories in Hong Kong
  3. support the development of the five Hong Kong R&D Centers for integrated technology and the application in logistics and supply chain management, textiles and apparel, information and communications technology, automotive parts, nano technology and advanced materials, along with the development of the Hong Kong Science Park and the Hong Kong Cyberport

Guangzhou

Positioning Area Major Growth Points
  • National core city and an integrated gateway city
  • International commerce and industry centre
  • Integrated transport hub
  • Technological, educational and cultural centres
International commerce and industry centre
  1. support Guangzhou to develop a regional private equity trading market and establish a regional centre for equity and commodity trading
  2. support Guangzhou to research and establish an innovative futures exchange that takes carbon emission as its first trading commodity
Integrated transport hub
  1. carry out reconstruction and expansion work at the airports in Guangzhou; conduct preliminary research for the construction of a new airport in Guangzhou; and research and develop a batch of regional airports and general airports
  2. speed up the development of an integrated Guangzhou-Shenzhen international transportation hub
Technological, educational and cultural centres
  1. proactively plan and carry out next generation information technology, artificial intelligence, healthcare, marine technology and new materials; nurture and develop new operational models and platforms for sharing economy and experience economy

Shenzhen

Positioning Area Major Growth Points
  • A special economic zone, a national core economic city and a national innovation hub
  • To expedite its transformation into a modern and international city
  • A city of innovation and creativity with global influence
Finance
  1. support Shenzhen in developing its capital markets with the Shenzhen Stock Exchange as its core in accordance with relevant regulations; and expedite the process of financial liberalisation and innovation
  2. support Shenzhen in developing a pilot zone for development in insurance innovation; further enhance the connectivity between Hong Kong and Shenzhen markets and promote cooperation between Macao and Shenzhen with respect to special financial products; and launch TechFin pilot projects
Innovation, creativity and living
  1. support Shenzhen in bringing in international high-end creative and design resources; and vigorously developing its modern cultural industries
  2. develop an international cultural and creative base, and explore a new mode of cooperation in cultural and creative industries between Hong Kong and Shenzhen
  3. support the introduction of domestic and international high-end education and medical resources
Technology
  1. support the establishment of the Belt and Road Life Science and Technology Advancement Alliance by relying on the China National GeneBank in Shenzhen
  2. support the development of a globally influential and competitive cluster of world-class high-end digital-focused manufacturing industries on the east bank of the Pearl River with Shenzhen and Dongguan

2. Key Areas for Three Free Trade Zones


Free Trade Zones Positioning Key Areas
Qianhai of Shenzhen Strengthen the role of Qianhai as an engine of cooperation and development
  1. expand the functions of offshore accounts (OSA)
  2. support international financial institutions to set up branches in Qianhai of Shenzhen
  3. support the Qianhai Mercantile Exchange of the Hong Kong Exchanges and Clearing Limited in establishing a spot commodities trading platform for serving domestic and foreign clients
  4. develop a new type of international trade centre, develop offshore trading, and create a settlement platform for trade in goods
  5. build a platform for offshore innovation and entrepreneurship, and allow technology enterprises that register in the zone to operate worldwide
  6. support the commencement of R&D businesses in suitable bonded Special Customs Supervision Areas
  7. collaborate with Hong Kong to develop an international legal services centre and an international commercial dispute resolution centre
Nansha of Guangzhou Collaborate with Hong Kong and Macao to develop a high-standard gateway for opening up
  1. devote efforts in developing niche financial services such as shipping finance, fintech, as well as aircraft and ship leasing
  2. develop offshore financial business, and explore the development of a trading platform for innovative insurance elements such as international shipping insurance
  3. explore the establishment of a GBA international commercial bank in the China (Guangdong) Pilot Free Trade Zone
  4. support the establishment of a global quality and traceability centre for import and export commodities in Nansha of Guangzhou
  5. plan and develop an industry cooperation zone for in-depth collaboration between Hong Kong and Guangdong in Nansha of Guangzhou
Hengqin of Zhuhai Develop a demonstration zone for in-depth cooperation among Guangdong, Hong Kong and Macao
  1. support the coordinated development of Hengqin, Zhuhai Free Trade Zone and Hongwan area, and develop a Guangdong-Hong Kong-Macao logistics park
  2. expedite the development of major cooperation projects including the Macao-Hengqin Youth Entrepreneurship Valley (Inno Valley Hengqin) and the Guangdong-Macao Cooperation Industrial Park, and study the development of a Guangdong-Macao information hub
  3. support the development of the Traditional Chinese Medicine Science and Technology Industrial Park of Cooperation between Guangdong and Macao
  4. explore allowing eligible Hong Kong, Macao and foreign medical personnel to practice directly in Hengqin
  5. search and recruit foreign medical staff in Hong Kong, Macao and who are eligible to work in Hengqin
  6. jointly develop an integrative livelihood project covering elderly care, living, education and healthcare
  7. research the possibility of establishing a healthcare fund to offer healthcare protection for Macao residents receiving medical treatment in Hengqin
  8. consider the possibility of establishing schools in Hengqin for children from Macao

In addition to the above policies that are applicable to each of the Free Trade Zones, the Outline also supports eligible banks and insurance institutions from Hong Kong and Macao to establish a physical presence in the Free Trade Zones to facilitate the establishment of a Hong Kong-Macao entrepreneurship and employment pilot zone.

3. Key takeaways for Intra-zone Cooperation

The Outline defines the positioning and functionality of each core city and Free Trade Zone, setting out a solid foundation for effective coordination of the overall development of the GBA. With respect to intra-zone cooperation, the Outline further specifies the following key cooperation project and areas:


Major Cooperation Areas Key Cooperation Projects or Areas
Technology and Innovation
  1. pursue the development of the “Guangzhou-Shenzhen-Hong Kong-Macao” innovation and technology corridor
  2. support the development of major carriers for innovation such as the Hong Kong-Shenzhen Innovation and Technology Park
  3. support the development of Hong Kong as a regional intellectual property (IP) trading centre; launch an IP securitisation pilot
Infrastructure
  1. devise a development plan for inter-city railway in the GBA, and improve the railway networks of the GBA
  2. focus on connecting the Mainland with Hong Kong and Macao, as well as connecting the east and west coasts of the Pearl River Estuary, and build a rapid inter-city transport network mainly focused on high-speed rails, inter-city railway and highways
  3. pursue the operations of public inter-city passenger transport service in the GBA, and promote the use of a “single ticket” for all connecting trips and a “single card” for all modes of transport
Quality of Life
  1. explore opening up a Hong Kong-Shenzhen-Huizhou-Shanwei sea travel route
  2. support Hong Kong and Macao investors in setting up pension and other social services facilities through sole proprietorship, joint-venture, cooperation, etc. in the nine PRD municipalities in accordance with regulations
Major Cooperation Platforms
  1. support the development of the Hong Kong-Shenzhen Innovation and Technology Park in the Lok Ma Chau Loop and the adjacent Shenzhen Innovation and Technology Zone, to develop an innovation and technology cooperation zone
  2. take forward the development of youth entrepreneurship and employment bases for Hong Kong and Macao, such as the Shenzhen-Hong Kong Youth Innovation Entrepreneurship Base, and the Qianhai Shenzhen-Hong Kong Youth Innovation and Entrepreneur Hub

III. KWM in GBA

The sheer scale and ambition of the GBA as set out in the Outline will bring boundless opportunities to local and international business. However, by combining two social systems, three customs territories, and three legal systems in one bay area, the GBA will also bring a unique set of challenges. Having been established in the GBA for over a decade, we are well-placed to help our clients navigate the intricacies and complexities of the area, while helping them realise their objectives.

In June 2018, King & Wood Mallesons announced the creation of the KWM International Center in the GBA to combine the expertise of our Shenzhen, Guangzhou, Hong Kong and Sanya offices, as well as the resources of our global network.

These four offices and the KWM International Center boast over 450 legal professionals, who are well positioned to provide one-stop comprehensive legal services for our clients in China and abroad.

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