New Opportunities for the Guangdong-Hong Kong- Macau Greater Bay Area www.pwccn.com Content Aiming for top global GDP ranking 4 Competitive Industries, Bright Prospect for Development 9 Concentration of Enterprises, Leading in Finance and 14 Technology Great Plan Generates Great Opportunity 18 “三”shaped world-class city cluster with Hong Kong, Shenzhen 19 and Guangzhou as three core cities Seamless connection between infrastructure facilities and public 20 services, rapid flow of production factors Attractive shopping and lottery services, integrated single tourist 21 destination Promoting the competitiveness of the manufacturing sector, 22 cultivating high value-added industries Enhancing cooperation while reducing competition to build a 22 world-class financial and technological innovation centre Development of smart city and promotion of high quality 23 domestic products PwC 2 On the occasion of the 20th anniversary of the return of Hong Kong to China, during President Xi Jinping’s visit to Hong Kong, the National Development and Reform Commission (NDRC), the People’s Government of Guangdong Province, the Hong Kong SAR and the Macau SAR, jointly signed the Framework Agreement on Deepening Guangdong-Hong Kong- Macau Cooperation in the Development of the Greater Bay Area. Earlier this March, Premier Li Keqiang proposed "to promote and deepen the cooperation between Chinese mainland, Hong Kong and Macau, and to formulate a plan for the development of a city cluster in the Guangdong- Hong Kong-Macau Bay Area, give full play to the distinctive strengths of Hong Kong and Macau, and elevate their positions and roles in China's economic development and opening up.” It is reported that the Development Plan for the City Cluster in Greater Bay Area is formulated by the National Development and Reform Commission (NDRC) and other departments and will be announced in the near future. Hong Kong’s Chief Executive Carrie Lam highlighted in her first Policy Address that the Hong Kong SAR Government will actively participate in taking forward the development of the Bay Area, so as to create favourable conditions for diversifying Hong Kong’s industries, in particular for promoting innovation and technology development. Moreover, the SAR Government will further facilitate measures for Hong Kong people to study, work, and start up and operate business, live and retire in the Bay Area, thereby facilitating the flow of people, goods, capital and information between Hong Kong and other cities in the Bay Area. The SAR Government has renamed the Steering Committee on Co-operation with the Mainland as the Steering Committee on Taking Forward Bay Area Development and Mainland Co-operation, highlighting its significance. The central government attaches great importance to the development of the Guangdong-Hong Kong-Macau Greater Bay Area (“the Greater Bay Area”). The development plan is not only a local and regional strategy between the two special administrative regions and several mainland cities, it is also a long-term plan at the national level. So, what are the new opportunities and improvements that such an important plan would bring? PwC Aiming for top global GDP ranking 4 Guangdong Province has always led other provinces in terms of total economic size in China. In 2016, its GDP reached RMB 7.95 trillion, accounting fo r nearly 11% o f the national ec onomic aggregate o f RMB 74.41 trillion. The GDP of Hong Kong and Macau were about RMB 2.23 trillion and RMB 311.9 billion respectively. Total GDP of Guangdong, Hong Kong and Macau regions was about RMB 10.49 trillion, equivalent to 14% of the national economic aggregate. This is comparable to the world's tenth largest economy - Canada; and the total population of the three places is close to 1 20 million, almost the same size as Mexico or Japan, the world’s 10th and 11th most populous country. Therefore, Guangdong, Hong Kong and Macau taken together can be “as rich as a country” in terms of total economic size and population. Area and population (10,000) of the 9+2 cities in Greater Bay Area, 2016 Hong 735 Kong Macau 64 Guangzhou 1404 Zhaoqing 14,891 km² Shenzhen 1191 Guangzhou 7,434 km² Huizhou 11,346 km² Zhuhai 168 Foshan Dongguan Foshan 746 3,798 km² 2,465 km² Shenzhen Jiangmen 454 Zhongshan 1,997 km² 1,783 km² Hong Kong Jiangmen 1,106 km² Zhaoqing 406 9,505 km² Zhuhai Macau Huizhou 478 1,732 km² 30.5 km² Dongguan 826 Zhongshan 323 Total area of the 9+2 cities Total population of the 9+2 cities accounts accounts for 31% of Guangdong Province for 62% of Guangdong Province 31% 62% 9+2 cities in 9+2 cities in Greater Bay Area Greater Bay Area 69% 38% Other regions of Guangdong Province Other regions of Guangdong Province Source: Municipal bureaus of statistics, Wind Info, PwC Summary 5 A ccording to estimates by China The core of the Greater Bay Area is 1) Hon g Kon g RMB 2,232.6 billion Centre for International Ec onomic the 11 (9+2) cities with a total Ex changes, one of the country’s top population of about 68 million, 2) Gu a n gzhou RMB 1,961.1 billion think tank, by 2020, the total namely Guangzhou, Shenzhen, 3) Shenzhen RMB 1,949.3 billion economic output of the Greater Bay Zhuhai, Foshan, Huizhou, A rea will be comparable to that of Dongguan, Zhongshan, Jiangmen 4) Fosh a n RMB 863 billion the Tokyo Bay; by 2030 the Greater Zhao qing, and the two special 5) Dongguan RMB 682.8 billion Bay Area’s GDP is expected to administrative regions, Hong Kong amount to RMB 30.4 trillion (USD and Macao. 6) Hu i zhou RMB 341.2 billion 4.62 trillion), surpassing the 7) Zh on g shan RMB 320.3 billion economic size of Tokyo Bay Area The total economic size and (RMB 21 .3 trillion, USD 3.24 trillion) population of the 9 cities in the 8) Macau RMB 311.9 billion Pearl River Delta accounts for 85% and the New York Bay Area (RMB 9) Jiangmen RMB 241.9 billion 1 4.4 trillion, USD 2.18 trillion), to and 5 2% that of Guangzhou become the world’s largest bay in Province, respectively. The ranking 10) Zhuhai RMB 222.6 billion of the 11 c ities by total economic size terms of economic scale. 11) Zh a oqi n g RMB 208.4 billion in 2016 are as follows: GDP of the Greater Bay Area 9+2 cities and Guangdong Province, 2016 (RMB 100 million) The total economic size of the 9 cities in Pearl River The 9+2 cities in Greater Bay Area account for Delta represents 85% of Guangzhou Province. 13% of the country’s overall economic size. 15% 13% 79,512 Other regions of 9+2 cities in Guangdong Province Greater Bay Area 85% 87% 22,326 9 cities in Pearl Other regions of 19,611 19,493 River Delta the country 8,630 6,828 3,412 3,119 3,203 2,226 2,419 2,084 Hong Macau GuangdongGuangzhouShenzhen Zhuhai Foshan Jiangmen Zhaoqing Huizhou Dongguan Zhongshan Kong Province Source: Municipal bureaus of statistics, Wind Info; Factiva(exchange rate: closing price of HKD and MOP against RMB on 31 December 2016); P wC A n a l ysi s 6 T h e 11 cities in the Greater Bay Area are divided T h e ov erall economy size of t he three in t o three levels by economic scale: Hong Kong, la rge cities in level 1 is t en times that of Guangzhou and Shenzhen are in level 1, they have the last three cities. a total GDP of more than or close to RMB 2 The 11 cities are in different stages of tr illion, n ot inferior to any province ranks middle growth regarding GDP per capita. in t he national lev el. For example, in 2016, Shaanxi However, this brings opportunities for Province ranked 1 5th nationwide with a total development if we see things from econ omic output of RMB 1 .90 trillion. Lev el 2 a n other angle. For example, GDP per in cludes Foshan and Dongguan, their GDP were capita of Macau, the highest of the 11 bet ween the range of RMB 650 billion and RMB cities, is almost ten times that of 850 billion in 2016, equivalent to that of the Tibet Zh a oqing. A u tonom ou s Region, which has a sm aller economic scale; the annual GDP of other six cities A s is sh own, GDP per capita of Macao were between RMB 2 00 billion to RMB 3 00 and Hong Kong are equivalent to that of billion, falling into level 3. The total economic a developed country, while Zhaoqing ou tput of Huizhou, Zhongshan and Macao was and Jiangmen, though have h igher GDP close to RMB 9 7 3.4 billion, while Jiangmen, per capita above the national average, Zhuhai and Zhaoqing amounted to RMB 67 2.2 a r e still considered as ‘developing billion. countries’, far behind Shenzhen and G u angzh ou . GDP per capita in Greater Bay Area , 2016 (RMB/person) 482,991 303,889 167,411 139,644 134,500 115,642 99,471 82,682 72,787 71,605 53,374 51,178 Hong Macau GuangdongGuangzhouShenzhen Zhuhai Foshan Jiangmen Zhaoqing Huizhou Dongguan Zhongshan Kong Province Source: Municipal bureaus of statistics, Wind Info; Factiva (exchange rate: closing price of HKD and MOP against RMB on 30 December 2016); PwC A n a l ysi s 7 Geog raphically, the 1 1 cities are divided Mor eov er, due t o the large differences in into three parts: coastal areas in the west, t h e econom ic dev elopm ent, the 1 1 cities t h e east and the n orthern land.