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Decoding the Outline Development Plan for Guangdong-Hong Kong-Macao Greater Bay Area (GBA)

Deloitte China March 2019 Contents q Characteristics of the GBA

• Why the GBA？

• Economy, institution and China-specific model of the GBA

• Five characteristics of the GBA q Decoding the GBA Outline Development Plan

• Overview of the GBA Outline Development Plan

• Priorities of the GBA Development Plan

• Analysis of the four priorities p GBA outlook

To explore synergistic development model for city clusters

New and old economy coexist with a sound industrial foundation

High degree of market openness and internationalization

3,000 12.0 Total GDP 2,500 10.0 of GBA in 2018

2,000 8.0 National RMB 1,500 6.0 6.8% 11 2,422 2,342 2,286 trillion 1,000 4.0

500 2.0 994 828 544 GBA GDP YoY: 7% 410 363 291 290 220 0 0.0 Shen深圳zhen Ho香港ng Kong G广州uangzhou F佛山oshan Do东莞ngguan 澳门Macao Hu惠州izhou Zh中山ongshan珠海Zhuhai Ji江门angmen Z肇庆haoqing

2018 GDP (R十亿人民币MB billion)) 2018 GDP: YoY (%,%,右 ri)ght)

• Total GDP of GBA reached RMB11 trillion in 2018 , growing by 7% YoY, slightly higher than national GDP growth (6.8%). • GBA accounted for 13% of total economy, with less than 5% of total population nationwide. • Shenzhen’s GDP in 2018 was RMB2.42 trillion, surpassing Hong Kong as No.1 in GBA for the first time. • YoY growth of Shenzhen and Guangzhou were 7.6% and 6.2% respectively, higher than Hong Kong’s 3%.

Source: Talking Data, Deloitte Research

1. The first world-class bay area across two systems

GBA has international financial center and shipping center developed under highly market-oriented environment, as well as world manufacturing center and leading technology innovation hub nurtured during economic transition.

2. Leveraging institutional complexity as unique strength, GBA anchors in different city clusters with multiple positioning Ba y a rea (10k T o t a l re (10 k) res id en t s P er m a nent t r illi on) G DP ( U SD c a pi t G DP p er g ro wth G DP (10 k TE U) t hrou g h p u c on t a i ner Po rt i n d us t ry ser vi ce S h a re o f i n d us t ry P ill ar Ø Tokyo Bay Area -Industrial ( U SD km 10k bay area 2 ) )

Manufacturing Ø New York Bay Area – Tokyo 3.67 4,383 1.86 4.24 3.6% 766 82.3% (auto, Financial bay area Bay Area petrochemical)

Financial services, New York Ø San Francisco Bay Area – 3.45 2,370 1.83 7.72 3.5% 465 89.4% real estate, Bay Area Technology bay area healthcare

San Techinnovation, Ø GBA: Francisco 1.74 768 0.82 10.53 2.7% 227 82.8% professional Dongguan manufacturing Bay Area services base, Hong Kong Tech innovation, financial center, GBA 5.65 6,765 1.38 2.04 7.9% 6,520 62.2% financial services, manufacturing Shenzhen technology innovation center

Source: people.cn, China Index Academy, Deloitte Research

Contribution of city clusters to GDP (% of national GDP)

72%

20% 20% 9% 10% 9% 6%

Source: statistic bureaus of local governments, GuotaiJunan, Deloitte Research

1. State-level strategic planning with policy dividends

Ø SARs: Hong Kong, Macao Belt and Road Initiative Ø SEZs: Shenzhen, Zhuhai Ø Guangdong FTZ: Nansha, Qianhai& Made in China 2025 Shekou, Hengqinareas

Coordinated development of regional Ø Overlap of policies for free ports, SARs, economy SEZs and FTZ pilot areas, offering Deepening opening up enormous room for trade and industry cooperation

2.Central government and governments of Guangdong, Hong Kong and Macao need to negotiate to move forward

Ø “One country, two systems, three customs zones” requires multilateral negotiation to develop policies for GBA. Ø Compared with other city clusters in China, resource allocation and regional development is more balanced in GBA, whose cities are more closely connected (relative to BohaiEconomic Rim) and more internationalized (relative to Hangzhou Bay Area). Ø Future policy negotiations will focus on supporting regional investment & financing exchanges, decentralization and tax reform (in favor of R&D investment and SMEs) to enhance GBA’s overall business environment.

Leverage its complementary institutional diversity of “one country, two Institutional systems, three customs zones” to pursue institutional innovation, and diversity enhance cooperation in talent attraction, capital flow, trade clearance and foreign investment; avoid fragmentation and duplication.

Manufacturing- Most GBA cities, except Shenzhen and Hong Kong, are still transforming from manufacturing towards high-end manufacturing and services. Manufacturing heavy industrial makes up a large portion of GBA’s economy, thus the focus should be structure increasing the share of services industry and enhancing GBA’s effects and impact as a whole.

Room for Intermodal transport to improve freight turnover and reduce transportation cost. infrastructure There’s room for intercity rail transportation to grow in terms of precision, and development inherent silos in particular need to be broken for coordinated information management.

Division of work Differentiation of dominant industries in many GBA cities is less apparent, and core positioning of these cities needs to be further refined and clarified, among cities to including differentiation of port functions, which requires division of work by be refined transport categories, competing globally with an industrial chain mindset.

Innovation GBA has abundant R&D resources, with a number of well-known colleges and universities, state key laboratories and startup incubators. Platforms such as potential to be alliance of enterprises, universities and research institutions may be established tapped in the future to speed up the progress of new technology from research to application.

© 2017. For information, contact Deloitte China. 10 Decoding the GBA Outline Development Plan Two objectives Five strategic positioning By 2022: • Substantially increase overall strength of GBA, deepen and broaden cooperation among Guangdong, Hong Kong and A vibrant world-class city cluster Macao, and further enhance internal driving forces for development in the region; • Essentially form a framework for an international first-class A globally influential innovation and bay area and world-class city cluster that is vibrant and highly innovative with an optimized industrial structure, a smooth technology hub flow of various factors and a pleasant ecological environment. By 2035: An important pillar for the Belt and Road • Shape an economic ecosystem and mode of development Initiative underpinned by innovation; • Markets within GBA are highly connected; A showcase for in-depth cooperation • Remarkably improve coordination of regional development; between the mainland and Hong Kong • People become wealthier; and Macao • Further cultural development, and enhance exchanges between different cultures; A high-quality sphere for living, working • Effectively protect ecological environment, and build an world- and travelling class bay area agreeable for living, working, and travelling.

Eight priorities

Spatial layout Putting forward ecological conservation Developing an international innovation and Developing a high-quality sphere for living, working and technology hub travelling Expediting infrastructural connectivity Strengthening cooperation and jointly participating in the Belt and Road Initiative Building a globally competitive modern industrial Jointly developing Guangdong-Hong Kong-Macao system cooperation platforms

•Spatial layout •Regional coordinated •Guangdong-Hong Kong- innovation Macao cooperation & •Developing innovation & development technology carriers and •Participating in the Belt platforms and Road Initiative •Enhancing environment for Developing innovation Deepening an regional international economic innovation & integration technology hub

Building a Developing a modern quality industrial working and system living sphere

•Advanced manufacturing •Infrastructural industry connectivity •Strategic emerging •Cultural soft power industries •Education •Modern service industries •Ecological conservation •Marine economy

Driven by poles: • Strong combinations of Hong Kong-Shenzhen, Guangzhou-Foshan and Macao-Zhuhai Supported by axes: • A rapid transport network involving mainly high-speed rails, intercity railways and high-grade motorways, as well as port and airport clusters • Utilize the Hong Kong-Zhuhai-Macao Bridge, speed up the construction of key transport infrastructures such as Shenzhen-ZhongshanBridge and the Shenzhen-Maoming Railway Radiating the development of the Pan-Pearl River Delta (PRD) Region: • Akey economic support zone with GBA as its vanguard and the Pearl River-Xijiangeconomic zone as its hinterland, propel development in South Central China and Southwest China as well as Southeast and Southern Asia.

Guangzhou: Shaoguan Shenzhen:

• Comprehensively strengthen its Meizhou • Expedite its transformation into functions as an international a modern and international city commerce and industry center Qingyuan Heyuan Chaozhou • Strive to become a city of and integrated transport hub innovation and creativity Zhaoqing • Enhance its function as Guangzhou Jieyang with global influence Huizhou Shantou technological, educational and Foshan Dongguan Shanwei cultural centers Yunfu Hong Kong: Shenzhen Zhongshan • To consolidate and enhance Macao: Jiangmen Zhuhai Hong Kong’s status as Yangjiang Hong international financial, • Develop into a world-class Maoming Macao Kong tourism and leisure center transportation and trade and a commerce and trade centers as well as an Zhanjiang cooperation service platform international aviation hub between China and Lusophone • Make great efforts to develop countries innovation and technology • Develop into a base for industries, nurture emerging exchange and cooperation industries where Chinese culture is the • Establish itself as the center mainstream and diverse for international legal and cultures coexist dispute resolution services in the Asia-Pacific region © 2019. For information, contact Deloitte China. Towns with distinct Integrated development of 13 Key node cities characteristics urban and rural areas Deepening regional economic integration Connecting Hong Kong and Macao and developing into a hub for the Belt and Road Initiative Guangdong-Hong Kong-Macao cooperation Jointly participating in the Belt and Road Initiative

Enhancing the functions of Shenzhen-Hong Kong modern Creating a globally competitive business environment: service industry cooperation zone in Qianhaiof Shenzhen: • Establish systems and regulations that are in line with advanced international • Strengthening the role of Qianhaias an engine of cooperation and standards for investment and trade regulation; development: Develop systems for open and innovative industries through links • Transform the function of the government, refine the pre-establishment with Hong Kong, and take forward the opening up and innovative development national treatment and negative list management approach for foreign of the financial sector; investments, and strengthen interim and ex-post supervision; • Enhancing cooperation in legal matters: Strengthen judicial cooperation and • Strengthen judicial exchanges and cooperation among Guangdong, Hong Kong exchanges between Hong Kong and Shenzhen, and reinforce administrative and Macao; protection of intellectual property rights; • Refine the mechanism for international commercial dispute resolution, and • Developing a new international city center: Expand the scope of develop the international arbitration center; implementation of Hong Kong’s engineering construction model, and develop a • Create and innovate the service model of “Internet + government services”;

top-tier international forest city. P ro v i d n g s t u pp ort • Establish a sound management structure for industry association legal persons; • Speed up the establishment of a social credit system in the nine PRD Developing Nanshaof Guangzhou into a demonstration zone municipalities. for comprehensive cooperation among Guangdong, Hong Kong Increasing the degree of market integration: and Macao: • Promoting investment facilitation: Implement the Agreements under CEPAs, • Developing a high-standard gateway for opening up: Adjust and optimize the and enable Hong Kong, Macao professionals and enterprises to enjoy national urban layout and spatial structure, and develop a “half-hour transport circle”; treatment; • Jointly developing a demonstration zone for innovative development: Carry out • Promoting trade liberalization: Speed up the establishment of single windows proactive planning for frontier technological areas, and nurture new business for international trade, promote the formulation of performance standards for models; the service industry that is in line with international standards, and expand the • Developing a key financial service platform: Develop specialized financial scope of mutual recognition of professional qualifications; services, and explore the establishment of an account management system that • Facilitating the flow of people and goods: Provide more convenient is conducive to the development of GBA; arrangements for exit endorsements, and formulate cross-boundary transport • Developing a quality living circle: Strengthen core ecological competitiveness, policies for vehicles and ancillary traffic management measures. highlight cultural features, and develop a special zone for international talents. Expanding opening up Taking forward the demonstrative functions of Hengqinof • Developing an important support area: Strengthen cooperation among Zhuhai for in-depth cooperation among Guangdong, Hong Guangdong, Hong Kong and Macao, and jointly participate in the BR Initiative; Kong and Macao: • Participating in international economic cooperation: Take forward GBA • Developing a demonstration zone for in-depth cooperation among Guangdong, enterprises’ joint efforts in ‘going global’, encourage overseas Chinese to Hong Kong and Macao: Develop Hengqinof Zhuhai into a high-standard participate in the development of GBA, attract investment from developed international leisure and tourism island, and build a Guangdong-Macao countries, introduce advanced technology, managerial experience and talents information hub and the Traditional Chinese Medicine Science and Technology • Expanding international markets: Leverage the advantages of Hong Kong and Industrial Park of Cooperation between Guangdong and Macao; Macao in international professional services, and enhance information exchange • Enhancing cooperation in livelihood matters: Support Zhuhai and Macao in among the overseas offices of the Mainland, Hong Kong and Macao. jointly developing livelihood projects with integrated services in Hengqin; • Strengthening cooperation in opening up: Support Hengqinand Macao in jointly developing the China-Latin America economic and trade cooperation platform. Developing special cooperation platforms

© 2019. For information, contact Deloitte China. 14 Developing an international innovation and technology hub Key points of the plan for developing an international innovation and technology hub Strengthening regional cooperation in 1 innovation and technology Enhancing the environment for 2 innovation in the region • Pursue the development of the “Guangzhou-Shenzhen- Hong Kong-Macao” innovation and technology corridor; • Support the development of major technological • Implement facilitation relating to infrastructure facilities, R&D institutes as well as immigration and customs clearance, innovation platforms in the GBA; support institutes in working, living as well as the flow of Guangdong, Hong Kong and Macao to proactively participate in goods within GBA, and encourage national technological programs (special projects, funds, etc.) interaction and exchanges between technological and academic talents; • Develop a system of technological innovation built up primarily by enterprises, led by market forces and with an in-depth • Support Guangdong, Hong Kong and integration of industries, academia and research, and Macao in establishing in-depth implement the Guangdong-Hong Kong-Macao collaboration collaboration in areas such program in innovation and technology and the Guangdong- entrepreneurship and incubation, Hong Kong Technology Cooperation Funding Scheme. financial technologies, commercial application of technological achievements, international technology Developing innovation and transfer and the technology services 3 technology carriers and platforms industry, and develop Hong Kong into a financing center for high-tech industries • Optimize the allocation of resources for innovation, in GBA; develop and nurture a batch of platforms for • Step up IP administrative law technological innovation for industries, enforcement and judicial protection, and manufacturing innovation centers and enterprise support the development of Hong Kong technological centers; as a regional IP trading center. • Take forward the development of national innovation demonstration zones: military-civilian integration in innovation development in the nine PRD municipalities, five Hong Kong R&D centers, platform for the traditional Chinese medicine science and technology industries in Macao, etc.

2017 regional innovation clusters index ranking (selected) • GBA ranked 2nd globally in regional cluster Rank Regional cluster Country innovation capability 1 Tokyo-Yokohama Japan 2 Shenzhen-HongKong China • Market value of SZSE and HKEX combined exceeds 3 San Francisco US USD6.5 trillion, ranking 3rd globally 4 Seoul South Korea • Has four of the world’s top 100 universities 7 Beijing China 10 Paris France • Has more than 3,000 VC institutions Source: World Intellectual Property Organization The Global Innovation Index 2017, Deloitte Research Unicorns in Shenzhen % of patents owned by Guangdong’s top Enterprise Industry Date Latest round established of financing 100 innovation enterprises (by industry) CSOT LED display 16/11/2009 A Others 9% ZendaiCredit Internet micro finance 19/4/2010 A

Power & heat Fangdd.com Informationportal 10/10/2011 C generation and Royole Hardware 8/5/2012 D supply 2% Suishouji Internetfinance 1/10/2012 C

Automotive Cainiao Other networkservices 16/5/2013 B 5% Fenqile Internetfinance 15/8/2013 D Wzhouhui.com B2B 29/8/2013 B Information Computer, COFCOProperty Realestate development & 21/10/2013 A transfer, software telecommunication (Shenzhen) operation and other and IT services Jubao Otherfinancial services 14/5/2014 A 6% electronic equipment Interconnection manufacturing WeBank Banking 4/6/2014 A 55% Ping An Good Healthcare 20/8/2014 A Doctor Electric CECport Electronics & components 28/9/2014 B machinery and manufacturing equipment manufacturing Hive Box Logisticsmanagement 8/4/2015 A 23% Technology iCarbonX ITservice 20/10/2015 B Source: Guangzhou Daily Data & Digit Institute, Deloitte Research Source: pedata.cn, Deloitte Research

© 2019. For information, contact Deloitte China. 16 Developing an international innovation and technology hub With accelerated flow and aggregation of industrial elements, AI has become a new symbol of innovation and technology in GBA

Guangdong released planning for the development Guangzhou-Resources Shenzhen-Application of new-generation AI by three steps in 2018 • Guangzhou municipal government • Integrated corporations such as The scale of Guangdong’s AI launched IAB strategy in March 2017 Tencentwith AI deployments at core industries was about to promote manufacturing upgrade. base, technology and application RMB26 billion, accounting for levels help elevate Shenzhen's • Guangzhou municipal government about one-third of the overall AI development. and GAC signed strategic country, driving the scale of 2030F cooperation framework agreements • Shenzhen offers a variety of related industries such as with Tencent, aiming to build "smart scenarios for application and robots and smart equipment 2025F city" in multiple aspects. houses numerous innovation to exceed RMB200 billion. Top of global enterprises that transform AI value chain • GPHL signed a strategic cooperation technologies into specific 2020F agreement with iFLYTEKto explore 150B applications in people's lives, new development model of "pharma covering robotics, mobile phones, + intelligence" and jointly build a disease screening, finance and 50B smart healthcare services system. many other areas. 2017 • Government of BaiyunDistrict, Guangzhou and Huawei signed a 26B strategic cooperation agreement on cloud computing to build a new generation information industrial Major GBA cities complement each other in joint cluster in BaiyunDistrict. Hong Kong-R&D development of AI industrial ecosystem • Hong Kong has many scientific research Guang- • Solid R&D and manufacturing foundation institutions with international influence in AI research. For example, SenseTime zhou • Strong capability in resources (policy, funding, enterprises) aggregation and CUHK jointly developed an automatic face recognition system with Shen- • Has core AI enterprises and numerous startups over 99% of accuracy. zhen • Strong R&D capability • Hong Kong can attract international • Provide various scenarios for application talents, as well as enterprises in the Mainland to work with Hong Kong Hong • Resources of HEIs and advantages in enterprises. Tencentand HKUST joined basic scientific research hands to set up WeChat-HKUST Joint Kong Lab on Artificial Intelligence • Attractive to international talents Technology. • Policy support from central & local governments • Policy support. In May 2018, Ministry of Dong- Science and Technology and Ministry of guan Finance announced a policy that allows • Solid manufacturing foundation with huge universities and scientific research potential for integrated development institutions in Hong Kong to directly Foshan apply for Central Budget-Funded S&T • Home to the Guangdong Intelligent Manufacturing Programs, and funds may be disbursed © 2019. For information, contact Deloitte China. 17 Innovation Demonstration Park to Hong Kong for use. Source: Collated by Deloitte Research, Ping An Securities Developing an international innovation and technology hub Accelerated integration of AI with manufacturing and service industries AI has huge potentials for application products and solutions with more scenarios for its application in GBA Underlying Technology and level algorithm level Application level

§ AI + manufacturing: Drawing on Guangdong’s strengths in high-end new • Stronger support at • Increased R&D electronic communications and smart manufacturing, AI can serve as underlying level investment at strong support for smart manufacturing and other applications. technology level • Gap filling in AI chip § AI + service: With well-established service industries, especially in highly digitalized healthcare, finance, logistics and education sectors, Guangdong, • More resources in • GBA has made positive Hong Kong and Macao are more likely to apply AI. super computing and progress in computer cloud computing data vision, natural § AI + e-government: As leaders in terms of government data connectivity centers are being language processing and transparency in China, Guangdong, Hong Kong and Macao have great allocated to AI (NLP), etc. potentials in applying AI to e-government.

Accelerated deployment of “AI + service” in Vast potentials for “AI + robots” smart home and healthcare • GBA has the most complete robotics industrial chain and an • GBA is an important R&D and production base for home long-term accumulation of technology expertise. appliance and lighting in China as well as a key entry area for the integration of AI into family services • In 2017, Guangdong had 156 key robot manufacturers producing 20,662 industrial robots, a YoY increase of 50.2%, • GBA leverages AI to make traditional appliances smarter while accounting for 16% of the total output in China. focusing on home security, healthcare, smart entertainment, environment monitoring, resource management, etc. to realize • Application of industrial robots is speeding up, and robots in interconnection of smart products GBA are being applied in areas including equipment manufacturing (auto), electronic communications (3C • Focuses of “AI+ service” in the region: manufacturing), packaging and printing, logistics and warehousing, with the most industrial robots manufactured Foshan Dongguan Zhongshan Guangzhou, Zhuhai Huizhou and applied in Guangzhou, Foshan and Dongguan. Smart Smart Smart Smart home • Smart service robots are rapidly growing. GBA is facilitating appliance living lighting, 4K HD products interactive related the R&D and industrialization of smart service robots in lockset, appliance chips specific scenarios including education and entertainment, security healthcare and rehabilitation, elderly service and caring. • AI + healthcare: Supported by Sun Yat-senUniversity, hospitals affiliated Educational robot business is growing mature, represented by to Southern Medical University and Guangdong Provincial People’s Hospital, GBA is building an AI-based diagnosis and treatment center and UBTECH and HanwujiIntelligence in Shenzhen and Aawantin promoting smart semantic electronic medical record (EMR) systems. Guangzhou.

© 2019. For information, contact Deloitte China. 18 Source: Deloitte Research collation, Ping An Securities Building a modern industry system Key points of the plan for building a modern industrial system Advanced Strategic Modern service Marine manufacturing emerging industries economy industry industries

• Enhance the ecosystem of • Pursue the development and • Develop an international financial • Develop a modern marine innovation development for growth of new pillar hub and develop special financial industry system, optimize the manufacturing industry in industries including new- products and services, and build and upgrade industries with the Pearl River Delta; generation information financial platforms and systems in traditional comparative technology, biotechnology, Hong Kong, Guangzhou, Macao advantages such as marine • Develop an industrial belt for high-end equipment and Shenzhen with their own fishery, sea transport and advanced equipment manufacturing and new strengths; shipping; manufacturing on the west materials; bank of the Pearl River • Progressively promote mutual • Nurture and strengthen the spearheaded by Zhuhai and • Nurture and develop financial markets access and development of emerging Foshan; industries such as new expand the scale and scope of the industries and maritime energy, energy conservation cross-border use of RMB in GBA. services such as marine • Develop a cluster of world- and environment protection, Support Mainland, Hong Kongand biomedicine, ocean class high-end manufacturing and new energy vehicles, and Macao insurance institutions in engineering equipment industries, such as electronic form a belt of industry developing cross-border RMB manufacturing, integrated communications, on the east aggregation with R&D of reinsurance business. Continue seawater utilization, port and bank of the Pearl River with energy conservation and enhancing the Shanghai-Hong logistics; Shenzhen and Dongguan as environmental protection Kong Stock Connect, Shenzhen- its core; • Develop specialized financial technologies as well as the Hong Kong Stock Connect and services such as marine • Leverage the strengths of development of headquarters Bond Connect. insurance, reinsurance and Hong Kong, Macao, and bases as its core; • Develop a system of modern ship finance. Guangzhou and Shenzhen in • Proactively pursue the service industries and further the innovation and R&D; development of a digital development of Guangdong, Hong • Leverage the advantages of economy and a sharing Kong and Macao in professional complete industry chains in economy, and promote the services such as industrial design, Zhuhai, Foshan, Huizhou, application of digital culture and creativity, high-end Dongguan, Zhongshan, creativity in areas such as convention and exhibition, Jiangmen, Zhaoqing, etc. convention and exhibition, e- accounting and auditing, legal and commerce, medical and dispute resolution services, • Support Hong Kong’s efforts healthcare, education management consultancy. in exploring “re- services, tourism and leisure. industrialization” in sectors where it enjoys advantages.

© 2019. For information, contact Deloitte China. 19 Building a modern industry system GBA has a solid foundation in advanced manufacturing, and each of the nine cities in Guangdong has their own focuses Foshan: furniture, Guangzhou: auto, home appliances, petrochemical, electronics, Zhaoqing: auto electrical machinery and Shenzhen: lighting, ceramics, parts, electronic equipment manufacturing, electronic machinery transportation communications, communications, biomedicine, new Midea, Hisense GAC, Guangzhou energy, new material agricultural Kelon, Galanz Pharmaceuticals, Huizhou: digital Guangzhou Intelligent products, products, metal Green textile Huawei, Amer, Equipment petrochemicals, processing, food printing technology apparel, shoemaking, BYD, CIMC GAC’s smart factory for renovation, smart cement, auto and and beverage, intelligent connected Smart manufacturing of auto parts chemical ShaNoEVgus,an smart manufacturing of dishwashers TCL Group, Biel Crystal manufacturing of modern small unmanned Chinese medicine Manufactory, GSD Technology aerial vehicles, enabling Qingyuan Heyuan Smart terminal for mobile platforms for IoT communications, digital smart home synergy of auto appliances Guangzhou electronics, lithium-ion Zhaoqing battShery antou Huizhou Foshan Dongguan Shanwei Yunfu Zhong Shenzhen shan Jiangmen: auto, Jiangmen 澳门Macao Hong Kong 150 motorcycle, shipping, Zhuhai microphone, hardware Yangjiang Dongguan: electronic ceramic, textile, Maoming communications, electronic electrical machinery, communications, 1 Zhanjiang furniture, textile and Distribution of top 500 petrochemicals, Zhongshan: Zhuhai: electronic apparels, papermaking, manufacturers in Guangdong in 2018 printing, new material, medicine, electronics,co mmunications, home toy, chemicals, food and shoemaking appliances, appliances, biomedicine, beverage In black font: core manufacturing petrochemicals, sectors of the city chemicals, hardware, LingyiiTECH machinery Nine Dragons Paper, Kin lighting, apparels, Long Hardware In dark green font: examples of top 100 Customized manufacturing, electric manufacturers in Guangdong in 2018 furniture power Smart manufacturing in industrial internet YingmaiFood GreeElectric engineering glass industry; In light green font: examples of smart platforms Appliances, Ninestar, digital and smart OPPO manufacturing pilot and demonstration Fully automated projects in Guangdong in 2018 modular central Yueyufeng Iron & Steel smartphones © 2019. For information, contact Deloitte China. Key parts of new 20 control of producing Source: Deloitte Research collation antibody drugs energy vehicles Building a modern industry system Strategic emerging industries are expected to achieve breakthroughs and industrialized application in GBA Distribution of top 100 growth hi-tech companies in Guangdong in 2017 Pillar industries Electronic comm电子信息unications 44 Advanced 先进制造与自动化manufacturing and 21 • New-generation information technology automation New m新材料aterials 12 • Biotechnology New energy and 新能源与节能 11 • High-end equipment manufacturing energy conservation H高技术服务i-tech service • New materials 7 B生物与新医药iology and new 3 medicine Major industrial projects 航空航天Aerospace 1 En环境与资源vironment and 1 resources • 5G and mobile connectivity Output of strategic emerging industries in • 3D printing Guangdong Province is expected to reach • Intelligent robotics RMB1.5 trillion in 2020 • New-generation communications Drivers Guangdong’s strategies for • High-end medical and diagnostic developing strategic emerging equipment industries • Biopharmaceuticals such as protein Overallplanning GuangdongProvince’s 13th Five-Year • Genetic testing Plan for strategic emerging industries, development plan forGBA Major projects in emerging Funding Fiscal subsidies for basic research, industries social capital, guiding funds • Information consumption Innovation Talent attraction policies, colleges and • New healthcare technologies resources universities, innovative enterprises • Hi-tech service industry Innovative Model of startup-incubation- • High-performance integrated circuit organizational acceleration-cluster models • Marine engineering equipment Market nurturing Fiscal subsidies,government © 2019. For information, contact Deloitte China. procurement, demonstration projects 21 Source: Guangdong Economics and Technology Research Institute Building a modern industry system Four trends of M&As in GBA reshape an innovative and collaborative ecosystem M&As help reallocate GBA’s elements to drive the development of cross-city clusters

Intra-industry M&As help build Active upstream and downstream M&As innovative cooperation platforms open up the industry chain • Case 1: Focusing on mobile intelligent data and payment terminal • Case 1: Jiangmen KanhooIndustry Co., Ltd., a leading domestic solutions, Shen Urovoacquired 100% stake in Zhuhai Gainscha supplier of LIB cathode materials, wholly acquired Shenzhen Utimes Technology, a leading manufacturer of label and POS printers in China, Automation Equipment Co, Ltd. and Shenzhen ChengjieIntelligent at RMB815 million, connecting its upstream and downstream Equipment Stock Co., Ltd. in 2018 to expand its scale and industry chain of manufacturing and application with both competitiveness in Li-ion equipment and completed its leading hardware and software capabilities. business layout of “material + equipment”. • Case 2: LED lighting manufacturer Guangdong Huizhou NVC Lighting • Case 2: Shenzhen DynagreenEnvironmental Protection, a company invested RMB315 million to 40% stake in Hong Kong Blue Light focused on urban waste treatment, bought 100% stake in Guangdong Trading, a company focused on e-commerce and lighting products. Promising Environmental Protection, whose main business is waste The acquired company is dominant in selling and distributing lighting incineration power generation, to reinforce its leading position in products through e-commerce platforms and distribution channels. waste incineration power generation sector. The acquisition helped connect the upstream and downstream chain of manufacturing and international trade.

Cross-industry M&As facilitate the transformation and optimization of traditional Advance basic research through manufacturing industries M&As

• Case 1: SunaCo., Ltd., focusing on industry • Case: YunfengCapital and LivzonPharmaceutical finance and asset management, plans to buy Group Inc. jointly acquired part of the stake in 51% stake in big data application service LivzonMabpharm, Inc. to achieve the strategic provider Guangzhou MC. Science and goal of transforming into a high-end Technology with RMB127.5 million to drive its biomedicine company and stepping into digital transformation. McAbbiomedicine. • Case 2: Guangdong Super Telecom bought 51% stake in Connectekto step into the intelligent IoTsector

Source: Collated by Deloitte Research, mergermarket

© 2019. For information, contact Deloitte China. 22 Building a modern industry system Key points of the plan for developing GBA’s financial market Promote mutual Consider further lifting or financial markets relaxing investor restrictions Explore the access of qualification requirements establishment of a GBA Support Mainland, Hong Kong on Hong Kong and Macao international and Macao insurance institutions commercial bank in developing cross-border RMB reinsurance business Support Shenzhen in developing a capital Progressively promote market with the Shenzhen cross-border Allow eligible innovation Stock Exchange as its core transactions of and technology financial products such enterprises to secure • Develop a regional private listing in Hong Kong for equity trading market; as funds and insurance with GBA capital financing • Expedite the process of • Establish an innovative financial liberalization and futures exchange that innovation with the takes carbon emission as Shaoguan Shenzhen Stock Exchange its first trading commodity. as its core; Meizhou • Develop a pilot zone for Qingyuan Heyuan development in insurance Chaozhou innovation. ZhaoqingGuangzhou Jieyang Huizhou Shantou Foshan Shanwei • Develop as an RMB Yunfu Dongguan Shenzhen clearing center for Zhongshan • Establish a platform for Lusophone countries; Jiangmen Zhuhai investment and Yangjiang Hong Kong • Develop as a securities Maoning Macao financing serving the market denominated and Belt and Road Initiative; cleared in RMB, a green Zhanjiang • Set up an internationally finance platform and a recognized green bond Sino-Lusophone countries certification institution. financial service platform.

© 2019. For information, contact Deloitte China. 23 Building a modern industry system Vibrant capital market in GBA Hong Kong and Shenzhen as § Hong Kong Stock Exchange (HKEx) and Shenzhen Stock Exchange (SZSE) will provide new strategic agglomeration of IPOs of Chinese development opportunities for each other in terms companies in 2018 (by number of deals, of mechanisms and financial product collaboration. 100%=232) § GBA is an agglomeration for incubating small and 香港证券交易所主板HKExMain Board medium-sized enterprises (SME) and a cluster of 香港证券交易所创业板HKExGEM VC institutions in China. 25% SZSE深圳证券交易所 34% SZS深圳证券交易所中小板ESME Board 9% SZS深圳证券交易所创业板EChiNext GBA’s rising position among global financial 6% 5% Ne纽约证券交易所w York Stock Exchange centers 13% 8% 纳斯达克NASDAQ Guangdong-Hong San New York Tokyo Bay 上海证券交易所Shanghai Stock Exchange Kong-Macao Greater Francisco Bay Area Area Bay Area Bay Area Geographic Distribution of Chinese Companies Listed Global HKShenzhen Guangzhou 724 788 746 on Domestic and Overseas Stock Markets in 2018 783 726 708 Financial Centres Index 60 (GFCI24*) HK Shenzhen Guangzhou 6 1 6 50 Ranking of 3 16 30 global financial 40 centers 30 Hong Kong and TechFin and New York Tokyo Stock Shenzhen stock VC Stock Exchange Financial 20 markets, the largest institutions Exchange, institution/type offshore RMB trading NASDAQ 10 market 0

* Global Financial Centres Index (“GFCI”) is a competitiveness ranking of financial centers published twice a year by the UK think-tank Z/Yen. GFCI24 was updated on 12 September 2018. Source: zero2ipo, Deloitte Research © 2019. For information, contact Deloitte China. 24 Building a modern industry system Opportunities for developing financial services in GBA

• Cross-border • Huge fund demands for • FinTech startups • Shenzhen to develop mutual market access investment products a pilot zone for (e.g. RMB1.2 trillion • Private wealth • Cross-border two-way • Payment and development in needed to invest in management RMB capital pool clearing insurance innovation transportation • Cross-border RMB infrastructure during the • Electronic currency • Cross-border bonds 13th Five-Year Plan • Smart investment insurance (motor vehicle, medical period in Guangdong • Cross-border RMB advisory Province) settlement insurance) Infrastructure Asset Cross-border FinTech Insurance financing management finance

Rising RMB deposits in Hong Kong

(RMB100 million) 12,000

10,000

8,000

6,000

4,000

2,000

中国香港Hong K:o银行存款ng: ban:人k 民de币p存款osits: RMB deposits

© 2019. For information, contact Deloitte China. 25 Source: WIND, Deloitte Research Building a modern industry system GBA is expected to be the first in implementing “competitive neutrality” for the development of private economy With a higher level of private economic development, a more vigorous market system, as well as references from Hong Kong and Macao’s prolonged experience in running a market-oriented economy, GBA is expected to be the first in implementing the principle of “competitive neutrality” Profits and growth of industrial enterprises above Overview of private enterprises in GBA designated size in Guangdong in 2018 • Economy underpinned by private • High proportion of hi-tech Index Total profits Growth from enterprises: The added value of private enterprises: GBA has 1,800 listed economy in Guangdong Province was (RMB100 last year (%) companies, of which 456 are listed in RMB5,261.159 billion with an increase of Shenzhen. Hi-tech companies account million) 7.3%, accounting for 54.1% of the regional for over 70%, and strategic emerging GDP, 60% of investments, 75% of companies take up 50%, higher than Industrial enterprises 8309.69 -0.1 innovative achievements, over 80% of new that of the entire market which stands above designated size jobs and 95% of market entities. at 40%. Average R&D investment of Shenzhen-listed companies is 50% • Large number of export-oriented State-ownedand state- 1533.82 -8.2 higher than that of the entire market. enterprises: Guangdong’s foreign controlled enterprises investment in actual use in 2018 amounted • Private enterprises to drive the to RMB145.09 billion, an increase of 4.9%, building of new infrastructure: Collectively-owned 5.81 -21.5 four percentage points higher than national GBA will lead the 5G commercial company average. Private enterprises are the largest applications, and step up their trade entity, and foreign investmentin involvement in new infrastructure Joint-stock company 4947.09 2.1 actual use within the hi-tech manufacturing through PPP based on the strengths of industry grew by over 80%. In 2019, the its private enterprises in AI, industrial Foreign, Hong Kong, 3107.82 -3.8 State Administration of Foreign Exchange internet and IoT. Macao and Taiwan decided to launch a pilot scheme to invested enterprises facilitate foreign exchange receipts and payments for trade in goods. private enterprises 4123.08 2.8

Zhuhai-Tax reduction Nanshan District, Shenzhen-Intellectual • Zhuhai’s private economy maintains a good momentum of growth with 32,000 property protection newly-established private enterprises, an increase of 36.3%. Total taxes cut for • Nanshan District has nearly 380,000 private enterprises and has nurtured companies amount to RMB26.2 billion as a result of policies on tax cuts and fee 148 listed companies, of which private enterprises account for over 90%. reductions. • Nanshan District has stepped up efforts in research of key and core • Hengqinestablished the first system of reporting tax-related matters with technologies, developed a system of technological innovation built up integrity for exemption and the first arbitration platform for internet finance in primarily by enterprises, led by market forces and with an in-depth China, and implemented the policy of “Hong Kong people taxed as per Hong integration of industries, academia and research, and encouraged companies Kong laws and Macao people taxed as per Macao laws”. There are 2,744 Hong to undertake national key R&D plans and major special technological projects. Kong and Macao companies with 735 new establishments. • Develop a protection mechanism of fast-track authorization, confirmation and • Zhuhai tax authority further promoted the “interaction between banks and tax authorities” and “tax preservation program” and 1,092 more small and micro rights protection and build a pioneer district for the most stringent protection businesses gained RMB2.445 billion of unsecured loans based on their taxpaying of intellectual property rights. credit. © 2019. For information, contact Deloitte China. 26

Source: Collated by Deloitte Research, Statistics Bureau of Guangdong Province Building a modern industry system Encouraging entities in GBA to fund private enterprises and efficiently utilize assets with intellectual property rights Various new measures by traditional financing Explore new financing channels for GBA private entities in GBA enterprises

Commercial banks: Foreign banks target cross-border finance • Provide targeted financial products to meet the • In order to expand market, businesses and overseas presence, enterprises in Guangdong, Shenzhen and Hong Kong are in great demand of cross-border demands of private micro and small-sized financial services such as financing and settlement, which has attracted many enterprises: Such as ICBC Guangdong Branch’s foreign banks; “Yishuitong”, “Jingyingkuaidai”, etc. • In line with the establishment of an account management system to support • Moderately improve credit risk tolerance: the development of GBA as proposed in the Outline Development Plan, pilots Constantly improve the proportion of credit granted on cross-border capital management, RMB cross-border usage and capital to private micro and small-sized enterprises and account convertibility may be implemented to facilitate cross-border trade as reduce financing costs well as investment and financing settlement Shenzhen Stock Exchange: Develop supply chain finance as a special industry in GBA • Continuously deepen GEM reform: Relax GEM • Facilitate the cooperation between commercial banks and core supply chain listing and refinancing requirements, and be more enterprises, focus on core enterprises in the industrial chain, transform the inclusive to new economy “brick culture” of traditional banks into “data culture” through technologies, so as to effectively resolve the financing dilemma of micro and small sized • SZSE’s V-Next platform nowcovers 35 countries enterprises due to the lack of collaterals. and has provided services for nearly 8,000 Local governments take the lead in supporting private enterprises outstanding tech companies in total • Establish platforms with local policy guarantee to serve quality private New IP measures will likely mitigate the financing enterprises with real trading background, and induce financial institutions to dilemma for innovation-driven private enterprises provide stable loans; meanwhile, it can effectively reduce the default impact of private enterprises on banks and optimize client structure for banks • Effective IP protection -reduce taxes and Hong Kong supports the development of private enterprises in administrative fees: taking Hong Kong as an model, GBA extend the policy on raising the proportion of additional tax-deductible R&D costs to all enterprises, introduce • Explore packaging the receivables of quality private enterprises based on the patent box regime, enabling enterprises or individuals to model of asset backed securities (ABS), and issue them on Hong Kong’s public pay less taxes on profits derived from patented inventions market for overseas investors • Efficient use of assets with intellectual property • Public offering will help private enterprises improve their transparency of corporate governance, enhance market awareness and reduce direct financing rights -extend IPRs pledge loan: the Outline costs Development Plan proposes to include GBA and Guangdong Pilot Free Trade Zone in the pilot program on securitizing assets with intellectual property rights

© 2019. For information, contact Deloitte China. 27 Source: Deloitte research Developing a quality production and living circle Key points of the plan for developing a quality production and living circle from software and hardware perspectives Livable Business-friendly 宜游 Tourist-friendly Shaping a healthy bay area Developing an education and talents hub Jointly developing a cultural bay area • Support medical and healthcare service • Support higher education institutions from • Strengthen the cultural soft power and jointly providers from Hong Kong and Macao to set Guangdong, Hong Kong, and Macao in jointly shape a shape and enrich the substance of a up healthcare facilities in the form of sole operating education institutions; cultured bay area; proprietorship, joint venture, cooperation etc. • Vigorously bring in high-level international talents • Improve the systems of public cultural services as in nine PRD municipalities; to participate in the development and management well as the cultural and creative industries in GBA; • Raise the level of informatization with regard of GBA • Strengthen exchanges among the youth of to food safety monitoring in GBA Expanding the scope for Guangdong, Hong Kong and Macao employment and entrepreneurship Social security and social governance • Improve policy measure to facilitate Hong Kong • Allow Hong Kong and Macao residents who and Macao residents, especially students from Building a bay area for leisure are working in Mainland to enjoy the same Hong Kong and Macao graduating from Mainland • Develop a system with diverse tourism products treatment as that for Mainland residents in schools, to live and work in nine PRD including culture and history, leisure and vocation, terms of education, medical care, elderly care, municipalities; healthcare and well-being as well as cruise and housing, transport etc.; • Extend local entrepreneurship subsidies and yacht travel; • Strengthen synergy in GBA’s anti-corruption support to cover eligible entrepreneurs from Hong • Explore suitable regions for developing a free port mechanism, establish a quality, efficient and Kong and Macao clean government for international yacht tourism

Software: ecological conservation Hardware: infrastructural connectivity

Building a modern comprehensive transport system: Establishing ecological protection barrier: Form a complementary and mutually beneficial system of port, Implement major conservation and restoration projects relating shipping, logistics and ancillary services with Hong Kong; raise the to ecosystems;take forward “Blue Bay” remediation action competiveness of Guangzhou’s and Shenzhen’s airports as plans, conserve coastal mangroves, and establish a coastal international hubs,promote the connectivity in GBA in terms of ecological belt;step up cooperation in ecological and logistics, public transportation and railways. environmental protection among Guangdong, Hong Kong and Enhancing and upgrading information infrastructure: Macao, and strengthen ecological and environmental systems in Promote the development of wireless broadband systems in the a concerted manner PRD city cluster; step up real-time surveillance, notification and Strengthening environmentprotection and management: warning as well as emergency response, and establish a Take forward cooperation in the management of water comprehensive cybersecurity defense system; and strengthen the resources, waterenvironment and water-related projects in the cooperation among Guangdong, Hong Kong and Macao in building Pearl River Estuary region; expedite the development of a smart cities regime for controlling the overall amount of pollutants Developing an energy security protection system： discharged into the sea as well as a system for the real-time Develop a clean, low-carbon, safe and efficient energy supply online monitoring of the marine environment; and implement system the management of target-based air quality control in the nine Strengthening protection for the security of water PRD municipalities. resources： Adopting an innovative, green and low-carbon To expedite the PRD water resource allocation project and step up development model: the construction of the fourth Macao water supply pipeline works; Strengthenexchanges and cooperation in low-carbon develop and improve the flood and storm surge prevention as well development as well as energy saving and environmental as drainage systems in Macao, Zhuhai, Zhongshan etc. protection technologies, and further promote clean production te©c hn2019olo. gFoier sin;f oimrmaplteiomn,e cnotn tnaceta Dre-loizettroe Cchainrba.on emission 28 demonstration projects; and take forward studies and demonstrations of the mutual recognition mechanism for carbon labelling across Guangdong, Hong Kong and Macao Developing a quality production and living circle Infrastructural connectivity

High-speed railways Greater connectivity -Build highly efficient connectivity between GBA with +10 other provinces and other cities in GBA will positively -Guangzhou-Shenzhen-Hong Kong Express Rail Link was stimulate the housing completed in 2018 -It takes 14 minutes to travel from Hong Kong to market in second and Shenzhen third-tier cities -It takes 48 minutes to travel from Hong Kong to Guangzhou Cross-border bridges Foreign investments 4 -Resolve the bottleneck problem at the Pearl River estuary -Build three new bridges on top of the current HumenBridge Build business parks -Reduce the time of driving within the Pearl River in the west of GBA estuary to 1 hour New airports 1 -Located in Foshan, west of GBA Talents and investors -Benefit domestic tourists and business flock into second and travelers third-tier cities -To upgrade several airports in GBA -To increase the number of international flights from 160 to 210

Support Jointly operating education institutions CAS to set • Jointly develop academic programmes, laboratories and research center up research in fields where they have a competitive edge organizatio ns in Hong • Promote cooperation in vocational education and jointly build specialized Kong vocational education parks

University alliance 52 universities • Higher education institutions in Guangdong, Hong Kong and Macao to explore in Guangdong province to the mutual recognition of academic credits of specified courses, implement enroll more flexible arrangements for exchange students, and share the results of students from Hong Kong scientific research and Macao • Encourage young people from Hong Kong and Macao to study in Mainland schools and provide convenience for them on entrepreneurship and employment Teachers from Hong Basic education Kong and • Encourage kindergartens, primary and secondary schools of Guangdong, Macao can Hong Kong and Macao to link up as“sister schools” apply for teaching • Teacher exchange: to allow kindergarten, primary school and secondary qualification school teachers from Hong Kong and Macao to teach in Guangdong in Mainland

Equal access to education Enjoy the same • Policy guarantee: children accompanying parents who take up cross-regional favorable employment who meet eligibility requirements could take university policies in entrance examinations terms of transportatio • Enrollment expansion: from pre-school stage to high school stage n, ticket etc.

1 Technical talents 2 Urgently needed talents

§ Skilled immigrants § Establish the list system of § Several Policies and Measures on urgently-needed talents Further Promoting Scientific and § Regularly publish urgent talent Technological Innovation issued by demands; expand channels to the Guangdong provincial recruit international talents government: taking the lead in granting permanent residency to outstanding talents

3 International talents 4 Innovation programs

§ International talent training model § Take forward innovation and entrepreneurship bases. Expand the § Draw experience from Hong Kong and scope for employment and Macao: attracting high-end entrepreneurship international talents § Launch a series of internship and § Strengthen the mechanism for the employment plans, programs and funds two-way flow of talents across regions, industries and organizations § Core objective: to build an international innovation center

© 2019. For information, contact Deloitte China. 31 Developing a quality production and living circle Shenzhen is the most attractive destination for talents in GBA, the connectivity among Mainland, Hong Kong and Macao needs to be activated

Talent attractiveness of GBA Compared with San Francisco and Sydney bay GBA is seeing a net inflow of talents, areas, GBA has great innovation and Talent distribution varies in different with Shenzhen playing a core role in entrepreneurship potentials as well as a large cities, mainly driven by basic and talent attraction talent pool integrated digital industries • International: GBA has a net inflow of • Innovation and entrepreneurship: Among the three bay talents from UK and US, a net outflow of areas, GBA has the highest proportion of corporate R&D • Core cities: Shenzhen, Hong Kong and Guangzhou, talents to Australia and Singapore personnel. In Shenzhen, a core technological innovation city in with Shenzhen as the lead GBA, over 90% of talents are corporate R&D personnel. • Domestic: GBA has a net inflow of talent Therefore, GBA excels in corporate innovation, but is relatively • Industry distribution: GBA has the highest against Beijing and Wuhan. Its level of weak in academic research proportion of high-level talents in manufacturing, talent attractiveness is similar to that of consumer products and ICT industries, all Shanghai and Chengdu, but sees a net • Talent characteristics: Among the three bay areas, the exceeding 10%. The degree of talent digitalization outflow of digital talents to Hangzhou. proportion of talents with doctoral degrees in GBA needs to be in the ICT industry is more than 80%, reflecting a improved. The highest proportion of talents are aged 25-34, higher development level of the basic digital • Core cities in GBA: Shenzhen is much and most talents are groups with 1-3 years and 3-5 years of economy; in terms of integrated digital economy, more popular than other cities in GBA in working experience. GBA features a group of talents who are manufacturing has the highest the degree of talent attracting international, domestic and local younger but not excessively young with capabilities and digitization high-end talents and digital talents, potential of development. However, the proportion of talents in highlighting the core role that Shenzhen high-level positions needs to be further optimized • Educational background: More than 25% of plays as a digital economic center in GBA talents have studied abroad; over 30% of talents • International connectivity: Compared with San Francisco hold a master’s degree or above. In terms of and Sydney, GBA heavily relies on talents from developed majors, finance-related majors rank top, followed countries and needs to attract more talents from countries by computer science, electrical engineering and involved in the B&R Initiative. Currently, GBA maintains electronic engineering. frequent talent exchanges with other international bay areas and is improving its international influence

Improving talent attractiveness: activate talent connectivity with Hong Kong and Macao § The inflow/outflow ratio of high-end talents and digital talents in Shenzhen is much higher than other cities in GBA, Inflow/outflow ratio of high-end talents and digital talents in major meaning that talents from other cities in GBA are cities of GBA 2.5 2.2 flowing into Shenzhen 2.15 § The size of Hong Kong’s talent pool ranks top three in GBA, 2 but talent exchanges with other cities in GBA are fewer than 1.26 Shenzhen and Guangzhou, with Macao even fewer than Hong 1.5 1.1 Kong. Talent exchanges between the two special 1.03 1.14 1.16 1.11 1.13 1.05 0.95 1.04 administrative regions and Mainland cities need to be 1.01 0.92 0.96 0.95 1 further improved § In recent years, Shenzhen Qianhai Free Trade Zone has been 0.5 focused on “Connecting with Hong Kong and Macao”. The government also has released favorable policies to support 0 Guangzhou Shenzhen Zhuhai Dongguan Foshan Huizhou Hong Kong Macao and encourage young talents from Hong Kong and 广州深圳珠海东莞佛山惠州香港澳门 Macao to settle in Shenzhen and jointly explore the High-end “Qianhaimodel” 高水平人才talents D数字人才igital talents © 2019. For information, contact Deloitte China. 32 Source: Deloitte Research, Digital Economy and Talent Development in the Guangdong-Hong Kong-Macao Greater Bay Area Developing a quality production and living circle Breakthroughs in tax system are key to talent policy integration in GBA

Highlights of talent policy integration 8 favorable tax policies for talents Outline Development Plan from Hong Kong and Macao • Encourage Hong Kong and Macao The highest tax rate in Hong Kong is • Talents from Hong Kong and Macao should pay residents who are Chinese 15%, lower than that in Mainland. GBA could attract talents at a faster individual income taxes in accordance with Mainland’s nationals to take up positions at standards if they stay in Mainland for more than 183 state enterprises/agencies on the pace and promote talent migration if days within one year (less than 24 hours of stay in Mainland in accordance with the new breakthroughs are made in tax Mainland should not be regarded as one day) law system. • To offset the tax rate differentials between Mainland • Study the possibility of Hong and Hong Kong, the local governments of Qianhai Kong and Macao residents who and Hengqin have implemented subsidy policies for are Chinese nationals to apply for overseas high-end talents and professionals in short supply. This subsidy policy has now expanded to be public service positions in applied in the 9 cities in Guangdong accordance with the law • The recruitment of public institutions of Guangdong Qianhai, Hengqin-attracting province will open to Hong Kong and Macao talents talents from Hong Kong and Macao • To encourage youth from Hong Kong and Macao to participate in innovation programs in GBA. By 2020, with favorable tax policies a youth innovation alliance will be established in ü Qianhaiof Shenzhen is the first in GBA. Young people from Hong Kong and Macao can China to grant subsidies to enjoy the same governmental subsidies as local overseas high-end talents and youth, including innovation and entrepreneurship urgently-needed talents on their subsidies, rent subsidies as well as direct subsidies taxes exceeding the rate of • Higher education institutions in Hong Kong and 15%, which is equivalent to an IIT Macao will be allowed to participate in scientific and rate of 15%. Therefore, talents from technological programs of Guangdong province Hong Kong would bear much less • Streamline entry-exit procedures for Hong Kong and tax burden if they work in GBA than Macao residents and provide more convenience to elsewhere in mainland. residents holding with Mainland Travel Permit ü Hengqinof Zhuhai has fully • Facilitate the cross-border travel of non-commercial implemented the policy of applying Overseas researchers enjoy cars. Hong Kong and Macao residents can drive to different tax rates to talents from special tax arrangements Guangdong via Hong Kong-Zhuhai-Macau Bridge, but Hong Kong and Macao. In addition not applicable to cars of Guangdong residents Eligible Hong Kong teachers and to IIT, Hengqinalso provides 15% • Reduce the time on custom clearance for goods of tax incentives for eligible researchers could enjoy tax transported between Guangdong and Hong Kong and Hong Kong or Macao funded exemption in Mainland over the expand the Single E-lock Scheme to all cities in GBA enterprises, and has cut taxes for given period if they pay relevant Hong Kong and Macao enterprises by more than RMB270 million since income taxes in Hong Kong Special implementation. Administration Region.

© 2019. For information, contact Deloitte China. 33 Source: Deloitte research Developing a quality production and living circle Building a livable ecological environment The Plan mentions ecological conservation for 35 times. The PRD region covered by GBA is not only one of the regions with the highest level of opening up and vitality in China, but also the region with greatest progress made in ecological conservation.

Envir onm • Strictest: Implement the strictest ecological environment protection regime, uphold the ental prote most stringent farm land protection and land conservation policies, and enforce the ction toughest water resource management system; • Technology+: Promote smart and green development of manufacturing industry and adopt appropriate, advanced, energy-saving and low-carbon environmental protection technologies to transform and upgrade traditional industries; • Major projects: Implement major projects to protect and rehabilitate the ecosystem, and comprehensively improve urban water bodies; • Industrial chain: The environmental protection industry is in a period of rapid growth, with huge demands and requiring large amount of investments.

Hea • Admission: Allow medical and healthcare service providers from Hong Kong and Macao lth to set up healthcare facilities in nine PRD municipalities; • Technology: Promote technological and medical innovations; and jointly advance the standardization and internationalization of traditional Chinese medicine; • Food: Track the origins of foods that are sold from Mainland to Hong Kong and Macao; and establish relevant risk and information systems to secure food safety.

Liva • Cooperation in social security and social governance: Allow Hong Kong and Macao ble residents to enjoy the same treatment and enhance the dovetailing of services; act in strict accordance with the Constitution, and strengthen juridical assistance.

Cross- Cultural exchanges boundary § Encourage youth from Hong Kong, protection of Macao to work in Mainland cities cultural § Exchanges between Chinese and heritage sites foreign cultures: promote Lingnan culture

Cantonese Opera

Lion dance

Promote culinary Dragon culture and develop a boat racing global culinary capital

A bay area for leisure

Signing of major § Tourism in GBA -world-class tourism Cultural projects: Pearl River destination Piano Dream Park and § 144-hour Facilitation Visa creative § Multi-destination tourism, convenient transportation industries Establishmentof the Association for the § Diversified products: cruise ships, yachts, in GBA Promotion of Cultural island tour, individual travel and high-end and Creative Industries in GBA tourism

© 2019. For information, contact Deloitte China. 35 Developing a quality production and living circle Tourism integration in GBA • “One Rail Link, One Bridge” has greatly promoted tourism in GBA: Hong Kong section of Guangzhou- Shenzhen-Hong Kong Express Rail Link and the Hong Kong-Zhuhai-Macao Bridge have been put into service (GBA becomes one of China’s top three airport clusters, with most cross-border connecting flights highly concentrated in Hong Kong International Airport) • Online tourism service platforms become the main actors in cross-border tourism services: 9 ports of entry implement 144-hour Facilitation Visa and provide policy facilitation • Opportunities for Omni-industrial chain: Group tours in GBA grow by 150%, and customized tourism products increase by 300%

Vendors seize the business opportunities in free-duty shopping

Flow of various factors including people, goods and capital is expected to expedite

Enhanced regional coordination and industrial cooperation will expand the scope of radiation and drive the development of neighboring regions

Strengthened IP protection and trial-and-error mechanisms would improve overall innovation environment

“Competitive neutrality” will creategreater space for the development of private enterprises