The Chinese government is expected to speed up industry updates to avoid being threatened by its trading partners amidst trade wars over the medium- and long-term future, according to DBS Bank (Hong Kong) Ltd.
The recent trade war between the United States and China will inevitably have a negative short-term impact on the Greater Bay Area in Guangdong province, which relies heavily on manufacturing and exports, Carol Wu Shuyan, head of Hong Kong and Mainland China Research at DBS Bank (Hong Kong), said in a Hong Kong media briefing on Thursday.
In order to avoid being threatened by trade partners in future, Wu feels it is likely that the central government will accelerate industry upgrades and focus on high-value-added products.
Over the next few years, the manufacturing of products such as new energy vehicles, smart appliances, environmental products and consumer internet-of-things hardware will continue to see strong growth in the Greater Bay Area, she said.
Meanwhile, China will have to play catch-up in the semiconductor industry, where Taiwan still has an advantage, said DBS telecom and techology analyst Tam Tsz-wang.
On February 18, Beijing issued the Outline Development Plan for the Guangdong-Hong Kong-Macau Greater Bay Area, which aims to increase the flow of people and goods in an area which covers Hong Kong, Macau, Shenzhen, Guangzhou and seven other cities in Guangdong province.
On Thursday morning, Hong Kong chief executive Carrie Lam Cheng Yuet-ngor met Guangdong governor Ma Xingrui at the Hong Kong/Guangdong Cooperation Joint Conference in Guangzhou. They signed an agreement that included 70 tasks for joint development by both sides in the Greater Bay Area.
Lam said Hong Kong and Guangdong province will work on projects including cross-border infrastructure, immigration, innovative technology, service industry and cultural development. She said the Guangdong government will set up 10 startup hubs in Guangzhou, Shenzhen, Dongguan and Foshan for local and Hong Kong youngsters.
Key challenges of the development in the Greater Bay Area include the lack of an education system that promotes innovation, as well as the lack of a culture that embraces longer term risks, Wu said, adding that local governments in the Greater Bay Area should put more effort into technology innovation.
“Forging China’s version of ‘Silicon Valley’, Shenzhen is expected to drive high-tech and research and development growth,” she said. At present, telecommunications equipment makers Huawei and ZTE, internet giant Tencent and electric car maker BYD are based in Shenzhen.
GDP per capita in the Greater Bay Area was around US$23,000, compared with US$42,000 in Tokyo Bay, US$82,000 in New York Bay and US$102,000 in San Francisco Bay, according to a research report published by DBS. Excluding Hong Kong and Macau, service industry currently accounts for 57% of GDP in the nine cities in Guangdong. By 2030, the ratio will increase to 72%.
The financial sector will see strong growth in the Greater Bay Area over the next decade, said Ken Shih, banking and insurance sector analyst at DBS Bank (Hong Kong). By 2030, the annual growth of insurance premiums will reach 16%, compared with a 17% in person-to-person loans, 14% in financial services and 12% in bank loans, he added.