No other city cluster in the world can arguably boast the scale, diversity as well as infrastructural and functional integration as the Guangdong-Hong Kong-Macao Greater Bay Area (“GBA”). Ambitious in size and scope, the GBA has been conferred the status of a key national development strategy. Its goal is to create an interconnected and synergistic bay area, comparable to – but also outshining – the likes of those in San Francisco, New York, and Tokyo, which must now look to their laurels. Through the forging of deeper economic ties and enhanced connectivity, the mega-city region aims to cement and give full play to each city’s unique strengths as well as showcase them on the global stage.
As an industrial, services and innovation powerhouse with gigantic, thriving markets, the GBA represents a unique proposition, presenting overseas companies with a plethora of untapped business opportunities brought about by its evolution into an increasingly innovation-led economy.
Discover why the GBA is a prime destination to do business and which industry-specific opportunities you can take advantage of.
Table of Contents
The world-class city cluster comprises nine cities in Guangdong Province, namely Shenzhen, Guangzhou, Zhuhai, Zhaoqing, Dongguan, Huizhou, Foshan, Zhongshan and Jiangmen, and the two special administrative regions of Hong Kong and Macao. Its unlimited potential is aptly illustrated by the fact that, although making up only 1 per cent of China’s total land area, the GBA has a population larger than that of Germany and a GDP surpassing that of South Korea, Spain, or Australia. Flexing its economic muscle, the GBA can easily be the 12th largest economic entity in the world.
Promulgated in February 2019, the Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area (“Outline Development Plan”) is the cornerstone policy document, laying the blueprint for the conceptualisation and construction of the GBA. At the heart of it is the overarching theme of innovation: the GBA is an “innovation-driven development strategy”, whose central mission is “to break new ground in pursuing opening up on all fronts in a new era”. This policy direction was reaffirmed in China’s 14th Five-Year Plan passed in March 2021, according to which the GBA stood at the helm of the country’s high-quality development.
Designated the next engine of growth propelling China’s economy into a new age, innovation and technology form the mainstay of the national economic agenda and play an important part in supply-side structural reform. The GBA’s role is akin to that of a regional demonstration zone, serving as a model of how the comprehensive upgrade of traditional growth drivers and cultivation of new pillar industries, such as biotechnology, high-end equipment manufacturing, new materials, and new-generation information technology, can be accomplished and replicated in other parts of the country. In addition to sharpening the overall competitiveness of China’s manufacturing industry, the GBA’s focus on fostering higher value-added growth through a marked shift towards advanced manufacturing as well as modern service industries will elevate China’s position in industrial and global value chains.
The GBA’s sector specialisms revolve around the following emerging pillar industries and areas of strategic importance.
The primacy of healthcare, which has been so plainly brought to the fore by the COVID-19 pandemic in recent times, is paving the way for the development of an extensive digital health ecosystem. Against the backdrop of shifting demographics, an aging population, growing affluence, and increasing health consciousness, China is poised to experience a health tech boom, with healthcare expenditure set to reach RMB 17.6 trillion by 2030. The surge in demand has prompted a reimagining and redefining of the ways in which healthcare is managed and delivered.
Health tech solutions can include digital diagnostics, medical imaging powered by artificial intelligence (“AI”), telemedicine, remote monitoring, digital pharmacies, medical devices, wearables, and online scheduling and task management systems.
There is no better place than the GBA to capture the abundant health tech opportunities, which has seen many healthcare companies spring up in recent years. In addition to plentiful resources and infrastructure, new players can draw upon the complementary strengths of the different GBA cities in healthcare. Established players, such as Tencent and Ping An, both headquartered in Shenzhen, are active participants in the digital health ecosystem. Tencent invested in iCarbonX that deploys AI in healthcare delivery and management. Ping An manages a growth-stage venture fund specialising in fintech and health tech. Further north, Guangzhou is widely regarded as an important regional health centre with 70 tertiary hospitals.
In particular, the amalgam of ample availability of investment capital, favourable scientific research conditions, and top-notch talent makes Hong Kong an ideal candidate to become the GBA’s health tech hub. The global financial hub is home to two world-renowned medical schools and boasts an internationally leading specialist training system for more than 60 medical sub-specialties.
Furthermore, a slew of policies aimed at streamlining the cross-boundary use and import of drugs and medical devices between Hong Kong and the rest of the GBA have been introduced, which will facilitate new entrants’ venture into the mainland healthcare market. Via the launchpad of Hong Kong, it may be possible to bypass some regulatory procedures required to approve new drugs and medical devices on the mainland, subject to certain conditions.
Prominently featured in China’s growth agenda as a key strategic industry and an emerging pillar industry to be developed in the GBA, biotech has enormous potential in the national and international arena. The global biotech market is slated to reach USD 2.44 trillion by 2028. The exigencies of the COVID-19 pandemic have only served to fuel interest in vaccines, regenerative therapies, and in honing pharmaceutical innovation capabilities even further. According to the Made in China 2025 roadmap, 20 to 30 innovative pharmaceuticals will be commercialised by 2025. Additionally, China’s total research and development (“R&D”) expenditure reached a historic high of RMB 3 trillion in 2022, representing an increase of 10.4 per cent year on year.
The GBA is a natural home to biotech endeavours: according to the 2022 edition of the Global Innovation Index Report published by the World Intellectual Property Organisation, the Shenzhen–Hong Kong–Guangzhou science and technology innovation hub is the world’s second best performing after the Tokyo–Yokohama cluster. Hong Kong deserves a special mention for its meteoric rise to becoming the world’s second largest biotech fundraising hub. According to the Hong Kong Stock Exchange (“HKEX”), riding on the coattails of the regional and national biotech boom, the international financial centre is expected to snatch the coveted first-place position from Nasdaq within the next five to ten years.
Since the amendment of its Listing Rules in 2018, the HKEX has been thronged with biotech companies eager to raise funds. The HKEX inserted Chapter 18A to its Listing Rules, which enables biotech companies in the pre-revenue stage to be listed, subject to several prescribed conditions, including having a market value of no less than HKD 1.5 billion, having core products that have passed Phase I clinical trials, and satisfying the general listing requirements for biotech companies. As of October 2022, around 90 pharmaceutical R&D and production companies were listed in Hong Kong, among which were 52 biotech companies.
Opportunities for close collaboration with other GBA cities abound, in particular, with Hong Kong’s closest mainland neighbour, Shenzhen. Displacing the outdated “front shop, back factory” model in the early days, the “front research, back industrialisation” narrative is a more fitting characterisation of the current mode of cooperation between Hong Kong and Shenzhen. Hong Kong’s strength lies in producing cutting-edge scientific research and conducting internationally recognised clinical trials. Shenzhen, on the other hand, has a sound and well-developed value chain in place to industrialise the fruits of research efforts undertaken in Hong Kong.
The construction of the Shenzhen–Hong Kong Innovation and Technology Co-operation Zone, which is well under way, is an infrastructural embodiment of the synergies in science and technology between the two GBA cities keen to take their partnership to the next level.
The explosive proliferation of digital commerce in China can be chalked up to its giant consumer base of nearly one billion internet users with predominantly “mobile-first consumers”. In 2021, the added value of China’s thriving digital economy contributed around 40 per cent to its GDP, with more than 25 per cent of retail sales transacted over the internet – well above the 18.8 per cent average worldwide. Further, e-commerce in China constituted a staggering 50 per cent of global retail sales online. In 2022, cross-border e-commerce sales reached an all-time peak of RMB 2.11 trillion.
Click here for a detailed discussion of how the GBA is playing a central role in China’s digital economy and opportunities in this area.
Previous pandemic-induced disruptions accelerated the shift in purchasing behaviour, with many consumers flocking to e-commerce stores and deserting brick-and-mortar shops indefinitely, resulting in an irreversible drop in footfall. According to a study conducted in 2021, 59 per cent of consumers in the nine mainland cities of the GBA felt more at ease doing their shopping online, compared to before the pandemic. In Hong Kong, the percentage was slightly lower at 50 per cent.
Consumers and retailers alike observed that the new buying habits were here to stay, with around one in four respondents able to forgo visits to brick-and-mortar stores entirely. In addition, 85 per cent of respondents from mainland GBA cities and 77 per cent of those from Hong Kong expected retailers to offer a seamless omnichannel shopping experience that unifies the physical and digital points of sale. With only 39 per cent of retailers providing a fully integrated shopping experience, however, there are opportunities for businesses to fill the gaping gap between online and in-store offerings to deliver exceptional value to omnichannel-inclined shoppers.
As well as offering a host of incentives for digital retail businesses, the GBA boasts logistical and trading prowess, making it the perfect place for e-commerce entrants to set up shop. The capital of Guangdong Province, Guangzhou, is the obvious choice. Guangzhou’s role as an international commerce and industry centre and integrated transport hub is steeped in history since the early days of the ancient Maritime Silk Road. Today, the largest city in Guangdong Province is the national focal point for trade exchanges, being the biggest epicentre for cross-border and live-streaming e-commerce activities in China. Businesses based in the GBA can leverage Guangdong Province’s sophisticated e-commerce network, which made up 60 per cent of China’s total imports and exports and almost 80 per cent of exports alone in 2021. Additionally, bonded zones and pilot zones have been set up around the GBA to promote cross-border e-commerce.
China’s accession (and Hong Kong’s imminent accession) to the world’s largest free trade agreement, the Regional Comprehensive Economic Partnership, will further facilitate e-commerce trading with Southeast Asian partners by providing a more streamlined framework in the form of standardised customs procedures and paperwork as well as a single, easy-to-navigate rulebook.
Next-generation information technology
Designated one of the key strategic industries in the 14th Five-Year Plan and an emerging pillar industry in the GBA’s Outline Development Plan, next-generation IT encompasses AI, blockchain technologies, the Internet of Things, big data, cloud computing, etc. Among them, AI is leading the way forward in extending the frontiers of technology. The transformative technology acts as a building block and stimulus for other trends, such as virtual reality, autonomous vehicles, robotics, chatbots and facial recognition.
Home to over 1,300 AI enterprises, Shenzhen leads the field in next-generation IT, which constitutes the city’s most rapidly expanding and biggest industry by market size. Based on the Shenzhen Next Generation of Artificial Intelligence Development Plan (2019-2023), China’s “Silicon Valley” is to become a preeminent world-class hub for AI applications, with the projected value of its AI industry expected to surpass RMB 30 billion, and the value of auxiliary industries forecast to exceed RMB 600 billion.
In September 2022, Shenzhen promulgated China’s first-of-its-kind local regulation aimed at turbocharging the development of AI, which took effect in November 2022. Under the new regulation, government bodies are encouraged to adopt AI-related technologies. In addition, the regulation seeks to beef up the national innovation city’s AI industry by boosting the provision of financial aid for AI-related research. To address security and privacy concerns related to the application of AI, the Shenzhen government formulated a set of guidelines on public data sharing and made specific kinds of data accessible to businesses and organisations operating in the industry.
Shenzhen and Hong Kong can harness their respective advantages to spearhead the development of AI in the GBA. First of all, Hong Kong’s robust R&D capabilities makes it an ideal base for the establishment of an R&D centre dedicated to the advancement of AI. As of 2022, five of its universities were included in the top 100 for engineering and technology specialisms. The Hong Kong University of Science and Technology, in particular, came 30th and 20th in international rankings for Computer Science and Information Systems, and Electrical and Electronic Engineering respectively. Clearly, the international financial centre already has the required state-of-the-art infrastructure and advanced R&D capabilities to carry out leading-edge AI-related research.
Building on its much-acclaimed role as the national hotbed for innovation, Shenzhen has full-fledged AI industry value chains at its disposal to commercialise research outputs from Hong Kong. An illuminating example of inter-GBA, cross-boundary collaboration is the partnership between Tencent AI Lab and the Chinese University of Hong Kong, Shenzhen (“CUHKSZ”). The Joint Laboratory of Machine Intelligence was officially launched in June 2018, whose purpose is to combine CUHKSZ’s strong points in academic research and the Tencent AI Lab’s strengths in R&D and industrial application to cultivate high-quality AI talent and conduct world-class research work.
On a separate front, Guangzhou is poised to become the next leading hub for innovations in AI. In February 2021, the Ministry of Industry and Information Technology published a circular approving the establishment of five new AI innovation zones, including in Guangzhou. The latest batch adds to the existing three in Shanghai, Shenzhen, and Jinan-Qingdao. With each AI innovation zone assigned a specific role, the focus of the AI innovation centre in Guangzhou is on fostering the development of intelligent industries in accordance with the development requirements of the GBA and expanding the applications of AI.
China is a global renewable energy powerhouse, with 40 per cent and 30 per cent of the world’s wind and solar power capacity installed respectively. According to the International Energy Agency’s forecast in 2022, renewable energy is projected to meet more than 70 per cent of the country’s additional electricity needs in the next three years, as coal consumption continues to recede into the background. Staunch in its commitment to fighting global warming and climate change, China will strive to peak its carbon dioxide emissions before 2030 and achieve carbon neutrality by 2060.
As a top-of-the-agenda item on the international, national, and local level, green transformation is a recurrent theme that runs through the Outline Development Plan for the GBA. One of the fundamental principles outlined in the document is the pursuit of green development and ecological conservation. To this end, the adoption of green and low-carbon energy, technologies, production methods, and modes of living will be vigorously promoted to drive the sustainable development of the GBA. Furthermore, the GBA is to assume the mantle of the forerunner in China’s green transformation by pivoting into a green development demonstration zone for other regions to emulate.
Click here for an in-depth review of the different direct and indirect business opportunities in the greener GBA.
The technological upgrade of core industries with relevance and significance for climate change, such as agriculture, manufacturing, construction, and resource extraction, is vital on the path to achieving sustainability. As the GBA represents the most mature region in terms of development and integration for digital and IT sectors, its part in growing green tech and energy industries will be monumental and greatly facilitate efforts on the national front to revamp the entire energy supply infrastructure.
Playing to their respective existing strengths, the GBA cities can together become pioneers in the “greenification” of supply chains to reduce carbon footprints by developing and implementing green tech solutions across the board, from downstream to upstream players. It follows, then, that the GBA’s green transformation will yield many rich opportunities for businesses to assist, with the help of technology, in “greenifying” and carrying out environmental remediation of supply chains at every tier.
Manufacturing – Automotive spare parts
China – the world’s biggest automobile market – is on the cusp of a metamorphosis. As well as embracing innovative trends, such as autonomous driving, e-mobility, and connected cars, China is experiencing major shifts in car ownership and usage preferences among drivers. As a result of new car sales continuing to languish, the average age of vehicles in China is set to hit 6.6 years by 2030 from 5.3 years in 2020, representing a 25 per cent increase.
This change will certainly send important reverberations throughout the automotive spare parts and aftersales industry in China. As the average age of vehicles continues to rise, the size of the aftersales repair and maintenance market will grow in tandem, which is projected to reach USD 249 billion by 2025. It is, therefore, up to parts manufacturers to grasp this opportunity and turn it into a viable and lucrative business proposition.
There is, however, room for improvement for China’s auto spare parts industry, and this is where the GBA’s synergistic connectivity and integration can come into play. Owing to the sector’s highly fragmented nature and complicated multi-level distribution structure, procurement is often an inefficient and difficult affair. The clear division of roles within the GBA, with each city having their own specialisms, allows for the formation of more cohesive and integrated clusters, thereby enhancing the efficiency of distribution networks. In particular, the GBA cities of Dongguan and Foshan are rising stars in advanced manufacturing, boasting impressive industrial clusters that by no means trail far behind Shenzhen’s.
With the fifth largest economy in the GBA, Dongguan is home to factories of many big names, such as Samsung, Philips, and DuPont. In fact, manufacturing accounts for more than half of its economy. Being nestled strategically between Guangzhou and Shenzhen means that the manufacturing hub is able to harness the spill-over effects from the two neighbouring giant economies.
A case in point would be Guangzhou-based electric vehicle manufacturer, XPeng Motors, whose move to increase production capacity at its plant in the GBA city of Zhaoqing in 2021 was said to have had a knock-on effect of encouraging a swarm of part suppliers to set up manufacturing facilities near its factory.
On a related note, the auto aftersales industry is still currently dominated by the production of primarily lower-value and lower-end parts and accessories, with domestic suppliers as the main players. For high-tech and higher value-added components, China is still reliant on imports. As China is keen to wean itself off reliance on imported technology and strives to consolidate its advanced manufacturing capabilities in the GBA, there will be opportunities aplenty in the production of high-end automotive components.
What can CW do for you?
Strategically located at the heart of the GBA with offices in Hong Kong, Shenzhen, and Guangzhou as well as further afield in Shanghai, we – as a professional advisory firm with over thirty years’ experience – are best positioned to help you tap into the myriad of business opportunities in the GBA and realise your ambitions of international expansion.
At CW, we understand that you want to hit the ground running when you enter the vast markets of the GBA. Setting the right market entry and development strategy from the very outset is, therefore, essential. We know that businesses come in all shapes and sizes, each with their own particularities. Providing you with a tailored and total solution from entry, set-up to supporting your business in reaching the next stage of growth in the GBA – every step of the journey – we can help you capture and capitalise on the rich possibilities of immense business potential in the GBA.
Are you ready to take advantage of the abundant opportunities that the GBA has to offer? To start your China business in the GBA, contact us today.