Asia business: An integrated southern China services hub?
By The Economist
From The Economist
Published: June 01, 2012
From The Economist
Published: June 01, 2012
May 28th 2012
FROM THE ECONOMIST INTELLIGENCE UNIT
When the reform and opening-up period launched in the early 1980s, Guangdong became the epicentre of the manufacturing boom that led China to become the export powerhouse that it is today. The province is now at the centre of the next wave of reforms aimed at rebalancing the economy away from manufacturing and towards services. Hong Kong's proximity to Guangdong means that it will play a central role in this shift, while nearby Macau will benefit too.
Local planners eye the emergence of an advanced economy spanning services and manufacturing, with Hong Kong's financial prowess at its heart. Business links are already very strong, especially in manufacturing, and services links are strengthening as well. An array of special zones has been set up, with the aim of allowing Hong Kong's financial and logistics services to spill over into dedicated areas of Guangdong. Such developments will help Guangdong in its quest to become an advanced manufacturing and services economy, but its ultimate success will depend on its ability to overcome shortcomings in labour resources.
Services liberalisation
Guangdong is the largest provincial economy in China, with GDP in 2011 of Rmb5.3trn (US$835bn at the current exchange rate). The province's rise has been achieved on the back of manufacturing investment from Hong Kong. In the period 1979-2010 Hong Kong companies invested US$155.9bn in Guangdong, a figure that amounted to 61.5% of the total foreign direct investment received by the province.
However, it has become increasingly evident that the comparative advantages that turned Guangdong into a low-cost manufacturing hub are gradually disappearing. The province's wealth has driven up local prices, encouraging investors to relocate capacity to inland China, where land and labour costs are cheaper. The migrant workers who previously flocked to cities such as Shenzhen, Dongguan and Foshan are increasingly finding work closer to home, squeezing labour supply and applying further upward pressure on wages. The sluggishness of global trade in recent years has also weakened Guangdong's position; the province achieved real GDP growth of 10% in 2011, far below the rates achieved prior to 2008-09. Guangdong remains China's biggest exporter, but it is coming under growing pressures to implement structural reforms in its economy.
The provincial authorities have long been aware of such weaknesses, and already have in train various plans aimed at diversifying the local economy away from exports, many of which are focused around co-operation with Hong Kong. Integrating services with its neighbour is a current priority. While much of Hong Kong's investment in Guangdong has been related to manufacturing, recent rounds of negotiations under the Closer Economic Partnership Arrangement (CEPA) between Hong Kong and China have created new opportunities for services. Under the latest agreement, which came into force on April 1st, Hong Kong insurance companies are permitted to open wholly owned insurance agencies in Guangdong. Under earlier agreements, Hong Kong companies are permitted to set up wholly owned hospitals and clinics as well. By late 2011, some 12 Hong Kong-invested clinics had been established. Guangdong is often used as a pilot zone for liberalisation measures announced under CEPA.
Another example of healthcare integration is the opening of the Shenzhen Binhai Hospital, also known as the University of Hong Kong Shenzhen Hospital, this year. Arrangements for mutual recognition of the qualifications of services professionals will also underpin services development and integration across the region. Integration is still in its early stages—some Hong Kong professionals have claimed that in practice it is still difficult to qualify to work in Guangdong: only a handful of doctors have managed to gain the appropriate licensing.
Such problems might be ironed out eventually, as the Chinese vice-premier, Li Keqiang, has indicated that China's services market will be fully opened to Hong Kong by 2017. It is likely that services companies expanding onto the mainland will first dip their toes in Guangdong as a geographically and culturally more familiar region, leading to greater services integration across the Pearl River Delta economy as whole.
New zones
Three new special zones in Guangdong are being established to support services integration across the region. The new zones are very much incipient. But they are well-located, close to world markets, and benefit from a unique range of preferential policies. Each of the new zones gives a high priority to services investment, pointing to Guangdong's likely emergence as an advanced economy over the next decade or two.
The Qianhai zone is situated within Shenzhen Special Economic Zone, and has been designated for the development of financial services, logistical services, technology and information services—in other words, the types of services in which Hong Kong is already strong. The idea is to create a spillover region in Shenzhen where Hong Kong service providers can expand across the border. Qianhai's development will be boosted by recent press reports that Hong Kong banks will be permitted to make direct loans within the zone, and Hong Kong companies will be able to get renminbi-denominated loans from Chinese banks in the area.
The details have yet to be fleshed out, but this indicates that Qianhai may play a role in piloting the gradual opening of China's capital account. Investment in Qianhai will be encouraged by regulations allowing Hong Kong and overseas professionals working within the zone to pay Hong Kong's low rates of income tax, rather than China's much higher marginal rates.
Another new zone is Hengqin, directly adjacent to Macau, which will allow Macau's gaming, tourism and leisure industries to expand into the much more spacious territory of Hengqin Island. The University of Macau is also opening a campus on Hengqin, accessible only from the Macau side. Hong Kong and Macau residents are also being offered Hong Kong/Macau rates of tax, and corporations setting up on Hengqin will pay a preferential 15% rate of tax, rather than the more generally applicable 25% rate. Hengqin, which is much larger than Qianhai, will also be a special customs zone, where goods imported for processing on Hengqin are exempt from import duty, as long as those goods are not shipped elsewhere in China. The zone remains tiny. Hengqin New Area was set up in 2009 with a population of only 3,000, although government plans have outlined ambitious hopes that Hengqin could be a thriving city of 280,000 by 2020.
Finally, the Nansha New Area has been set up on a spur of land very central to the Pearl River, lying between Macau and Shenzhen. The area is connected by express ferry to Hong Kong, and will focus on high-end services, as well as port services, tourism, leisure and advanced manufacturing. Preferential policies once again include a 15% tax rate as well as tax incentives for Hong Kong professionals working in the zone and matching funding for technology projects. The encouragement of high-end manufacturing represents an attempt by Guangdong province to move up the value chain and away from labour-intensive investments, which are increasingly moving to cheaper locales elsewhere in China.
New links
The strengthening of transport and communications links between the Hong Kong Special Administrative Region and Guangdong will facilitate further integration, while allowing Hong Kong to maintain its entrepôt role. Such plans include the ongoing construction of the three-way Hong Kong-Zhuhai-Macau bridge, which should be open to traffic in 2016. An express railway from Hong Kong to Guangzhou via Shenzhen is also under construction, for completion in 2015. This will not only shorten journey times from Hong Kong to Guangzhou to 48 minutes, but will also connect Hong Kong up with China's national network of high-speed railways. The existing inter-city rail link between Guangzhou and Zhuhai is also to be extended to Macau. Other plans that may be implemented include a rail link between the Hong Kong and Shenzhen airports.
An integrated regional economy?
Guangdong, given its strong links to the global economy, will find it easier than most other parts of the country to move up the value chain. Nevertheless, it must solve a number of daunting challenges if it is to do so. The population is starting to age, which will become increasingly apparent as inflows of young migrant workers slow. It also lacks the high-quality personnel required to sustain an advanced economy because educational services are insufficiently developed. This means Guangdong will not have the workers needed to meet demand in some sectors prioritised by the government, such as pharmaceuticals and renewable energy. For such reasons, the type of services in which Hong Kong has long specialised—from financial services to healthcare—can serve a useful purpose.
The growing transport links across the Pearl River Delta also point to growing regional integration, facilitating movements of goods and services in the region. The provincial government hopes that such developments will enable Guangdong to eventually emerge as a world-class advanced manufacturing-services hub. Hong Kong will play an important role in this transition, but its success will also rest on how Guangdong confronts more fundamental questions about its political economy, such as those relating to demography and education.
Economist Intelligence Unit
Source: Economist Intelligence Unit
©The Economist Newspaper Limited 2012
FROM THE ECONOMIST INTELLIGENCE UNIT
When the reform and opening-up period launched in the early 1980s, Guangdong became the epicentre of the manufacturing boom that led China to become the export powerhouse that it is today. The province is now at the centre of the next wave of reforms aimed at rebalancing the economy away from manufacturing and towards services. Hong Kong's proximity to Guangdong means that it will play a central role in this shift, while nearby Macau will benefit too.
Local planners eye the emergence of an advanced economy spanning services and manufacturing, with Hong Kong's financial prowess at its heart. Business links are already very strong, especially in manufacturing, and services links are strengthening as well. An array of special zones has been set up, with the aim of allowing Hong Kong's financial and logistics services to spill over into dedicated areas of Guangdong. Such developments will help Guangdong in its quest to become an advanced manufacturing and services economy, but its ultimate success will depend on its ability to overcome shortcomings in labour resources.
Services liberalisation
Guangdong is the largest provincial economy in China, with GDP in 2011 of Rmb5.3trn (US$835bn at the current exchange rate). The province's rise has been achieved on the back of manufacturing investment from Hong Kong. In the period 1979-2010 Hong Kong companies invested US$155.9bn in Guangdong, a figure that amounted to 61.5% of the total foreign direct investment received by the province.
However, it has become increasingly evident that the comparative advantages that turned Guangdong into a low-cost manufacturing hub are gradually disappearing. The province's wealth has driven up local prices, encouraging investors to relocate capacity to inland China, where land and labour costs are cheaper. The migrant workers who previously flocked to cities such as Shenzhen, Dongguan and Foshan are increasingly finding work closer to home, squeezing labour supply and applying further upward pressure on wages. The sluggishness of global trade in recent years has also weakened Guangdong's position; the province achieved real GDP growth of 10% in 2011, far below the rates achieved prior to 2008-09. Guangdong remains China's biggest exporter, but it is coming under growing pressures to implement structural reforms in its economy.
The provincial authorities have long been aware of such weaknesses, and already have in train various plans aimed at diversifying the local economy away from exports, many of which are focused around co-operation with Hong Kong. Integrating services with its neighbour is a current priority. While much of Hong Kong's investment in Guangdong has been related to manufacturing, recent rounds of negotiations under the Closer Economic Partnership Arrangement (CEPA) between Hong Kong and China have created new opportunities for services. Under the latest agreement, which came into force on April 1st, Hong Kong insurance companies are permitted to open wholly owned insurance agencies in Guangdong. Under earlier agreements, Hong Kong companies are permitted to set up wholly owned hospitals and clinics as well. By late 2011, some 12 Hong Kong-invested clinics had been established. Guangdong is often used as a pilot zone for liberalisation measures announced under CEPA.
Another example of healthcare integration is the opening of the Shenzhen Binhai Hospital, also known as the University of Hong Kong Shenzhen Hospital, this year. Arrangements for mutual recognition of the qualifications of services professionals will also underpin services development and integration across the region. Integration is still in its early stages—some Hong Kong professionals have claimed that in practice it is still difficult to qualify to work in Guangdong: only a handful of doctors have managed to gain the appropriate licensing.
Such problems might be ironed out eventually, as the Chinese vice-premier, Li Keqiang, has indicated that China's services market will be fully opened to Hong Kong by 2017. It is likely that services companies expanding onto the mainland will first dip their toes in Guangdong as a geographically and culturally more familiar region, leading to greater services integration across the Pearl River Delta economy as whole.
New zones
Three new special zones in Guangdong are being established to support services integration across the region. The new zones are very much incipient. But they are well-located, close to world markets, and benefit from a unique range of preferential policies. Each of the new zones gives a high priority to services investment, pointing to Guangdong's likely emergence as an advanced economy over the next decade or two.
The Qianhai zone is situated within Shenzhen Special Economic Zone, and has been designated for the development of financial services, logistical services, technology and information services—in other words, the types of services in which Hong Kong is already strong. The idea is to create a spillover region in Shenzhen where Hong Kong service providers can expand across the border. Qianhai's development will be boosted by recent press reports that Hong Kong banks will be permitted to make direct loans within the zone, and Hong Kong companies will be able to get renminbi-denominated loans from Chinese banks in the area.
The details have yet to be fleshed out, but this indicates that Qianhai may play a role in piloting the gradual opening of China's capital account. Investment in Qianhai will be encouraged by regulations allowing Hong Kong and overseas professionals working within the zone to pay Hong Kong's low rates of income tax, rather than China's much higher marginal rates.
Another new zone is Hengqin, directly adjacent to Macau, which will allow Macau's gaming, tourism and leisure industries to expand into the much more spacious territory of Hengqin Island. The University of Macau is also opening a campus on Hengqin, accessible only from the Macau side. Hong Kong and Macau residents are also being offered Hong Kong/Macau rates of tax, and corporations setting up on Hengqin will pay a preferential 15% rate of tax, rather than the more generally applicable 25% rate. Hengqin, which is much larger than Qianhai, will also be a special customs zone, where goods imported for processing on Hengqin are exempt from import duty, as long as those goods are not shipped elsewhere in China. The zone remains tiny. Hengqin New Area was set up in 2009 with a population of only 3,000, although government plans have outlined ambitious hopes that Hengqin could be a thriving city of 280,000 by 2020.
Finally, the Nansha New Area has been set up on a spur of land very central to the Pearl River, lying between Macau and Shenzhen. The area is connected by express ferry to Hong Kong, and will focus on high-end services, as well as port services, tourism, leisure and advanced manufacturing. Preferential policies once again include a 15% tax rate as well as tax incentives for Hong Kong professionals working in the zone and matching funding for technology projects. The encouragement of high-end manufacturing represents an attempt by Guangdong province to move up the value chain and away from labour-intensive investments, which are increasingly moving to cheaper locales elsewhere in China.
New links
The strengthening of transport and communications links between the Hong Kong Special Administrative Region and Guangdong will facilitate further integration, while allowing Hong Kong to maintain its entrepôt role. Such plans include the ongoing construction of the three-way Hong Kong-Zhuhai-Macau bridge, which should be open to traffic in 2016. An express railway from Hong Kong to Guangzhou via Shenzhen is also under construction, for completion in 2015. This will not only shorten journey times from Hong Kong to Guangzhou to 48 minutes, but will also connect Hong Kong up with China's national network of high-speed railways. The existing inter-city rail link between Guangzhou and Zhuhai is also to be extended to Macau. Other plans that may be implemented include a rail link between the Hong Kong and Shenzhen airports.
An integrated regional economy?
Guangdong, given its strong links to the global economy, will find it easier than most other parts of the country to move up the value chain. Nevertheless, it must solve a number of daunting challenges if it is to do so. The population is starting to age, which will become increasingly apparent as inflows of young migrant workers slow. It also lacks the high-quality personnel required to sustain an advanced economy because educational services are insufficiently developed. This means Guangdong will not have the workers needed to meet demand in some sectors prioritised by the government, such as pharmaceuticals and renewable energy. For such reasons, the type of services in which Hong Kong has long specialised—from financial services to healthcare—can serve a useful purpose.
The growing transport links across the Pearl River Delta also point to growing regional integration, facilitating movements of goods and services in the region. The provincial government hopes that such developments will enable Guangdong to eventually emerge as a world-class advanced manufacturing-services hub. Hong Kong will play an important role in this transition, but its success will also rest on how Guangdong confronts more fundamental questions about its political economy, such as those relating to demography and education.
Economist Intelligence Unit
Source: Economist Intelligence Unit
©The Economist Newspaper Limited 2012
GDP達8000億！中國廣東轉型服務業
2012-06
Web only
作者：吳凱琳
廣東2011年GDP達8350億美元，也是中國最大的省級經濟體。廣東崛起靠的是來自香港的投資，1979-2010年，香港企業在廣東的投資額達1559億美元，佔外國直接投資的61.5%。
不過，廣東在低成本製造上的競爭優勢已逐漸消失。財富推升了價格，促使投資人轉往中國內陸；移民勞工減少，當地勞力吃緊，薪資上升壓力更增一層。廣東仍是中國最大的出口重鎮，但進行結構性改革的壓力也越來越大。中國副總理李克強曾暗示，中國的服務市場將於2017年對香港完全開放；由於香港與廣東在地理和文化都比較接近，服務企業跨足第一步可能就是廣東，這也有助整合珠江三角洲經濟體。
廣 東設立了三個特區以支持服務業整合及價值鏈升級；這些地區尚在起步階段，但地點良好、鄰近全球市場，也有各項政策性優惠。強化香港與廣東間的交通與通訊連 結，將使讓整合更進一步，並維持香港的中心地位；這些計畫包括港珠澳大橋、廣深港高鐵等。廣深港高鐵通車後，不但可以縮短車程，也讓香港得以連結中國的高 速鐵路網。
廣東與全球經濟的連結緊密，朝價值鏈上方移動也會比其他地區容易，但廣東還是得先通過一系列重大挑戰，例如人口老化、高品質人才 不足等。珠江三角洲區域整合將帶動貨品和服務流通，當地政府也希望這樣的發展可以讓廣東成為世界級的先進製造樞鈕；香港會扮演重要角色，但廣東能否解決人 口、教育等問題，亦是成敗的重要關鍵。（黃維德譯）
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