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Hong Kong as the International Business Hub for the Greater Bay Area: Hong Kong’s Overall Future Dev

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Summary:Hong Kong as the International Business Hub for the Greater Bay Area: Hong Kong’s Overall Future Development Direction
Hong Kong as the International Business Hub for the Greater Bay Area: Hong Kong’s Overall Future Development Direction
Since the release of the Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area (the GBA Development Plan), various governments and regulatory authorities have been keenly discussing policies and measures designed to drive the integrated development of different sectors. The Hong Kong SAR Government has taken an active part in developing the GBA, liaising with the relevant mainland departments to push for different opportunities and improvements for Hong Kong people studying, working and living on the mainland. In 2019, the Central Government rolled out the so-called Eight Policy Measures and 16 Policy Measures to offer greater convenience to Hong Kong residents working and living in GBA mainland cities. PricewaterhouseCoopers Advisory Services Limited (PwC) has carried out a questionnaire survey and in-depth interviews among GBA enterprises on how the GBA should be developed further1. Having consolidated the insights and comments given by senior business executives in various sectors in the GBA and analysed the opportunities and challenges for Hong Kong, PwC has put together a raft of proposed measures for enhancing Hong Kong’s status as an international business hub. These measures can be divided into two categories – those looking at Hong Kong as a whole, and those concerned with its six key functional areas.

The following preliminary proposals were drawn up for Hong Kong as a whole, based on the feedback from 75 companies collected through in-depth interviews and a quantitative analysis of questionnaires returned by almost 400 GBA enterprises. They are designed to serve as a reference for Hong Kong as it maps out its future strategies for strengthening its unique advantages and looking to grasp new opportunities.

Talent Development
The development of talent is the cornerstone of a society’s economic success. In the past few decades, talent development has been one of the keys to Hong Kong’s growth. The city’s greatest strength in talent development is the high quality of its universities and higher education institutions. Combining the Chinese cultural heritage with the education ethos of Europe and the US, these institutions nurture first-rate “biliterate and trilingual” students who embrace a global perspective. Hong Kong’s higher education institutions are also an effective channel for attracting quality overseas students to Hong Kong to study and pursue their careers here. Based on the findings of the study, PwC has summarised the following recommendations to sharpen Hong Kong’s competitive edge in this area.

Firstly, Hong Kong should strive to strengthen the multi-faceted development of local talent. Efforts should be made to arouse local students’ interest in popular yet non-traditional subjects (such as logistics, trade, technology, engineering and supply chain management) by publicising the promising prospects of these disciplines (for example, by publishing stories of how start-ups with potential have grown). Meanwhile, steps should be taken to raise local talent’s awareness of and sensitivity to development trends locally and overseas, and to encourage young people in Hong Kong to become more competitive by paying closer attention to the latest global trends and broadening their international outlook.

Secondly, organisations in Hong Kong should consider cooperating with Hong Kong companies that have succeeded in the GBA, to make more internship and job opportunities available to young people from the city. This will help them get a better understanding of the China market. Exchanges of young people from Hong Kong and the mainland should be furthered, and young Hong Kong talent should be encouraged to learn more about Chinese and international cultures.

Hong Kong could also step up support and financial assistance for youth development. Community organisations should be encouraged to organise cross-regional and cross-border innovation and technology exchange activities, like product design competitions and entrepreneurship projects in the GBA, as well as overseas internship programmes and study missions. This will allow young people in Hong Kong and their peers from other regions to exchange creative ideas, scientific knowledge and technical skills, thereby widening their horizons and stimulating their creativity. Ideally this will help establish a culture conducive to the development of innovation and technology. Consideration should also be given to setting up youth entrepreneurship centres.

Next, action should be taken to foster exchanges and collaboration with new- and hi-tech mainland businesses, in order to create opportunities for interaction between talent from Hong Kong, overseas and the mainland. Both sides should come together to groom a bigger pool of talent dedicated to new- and hi-tech industries, especially talent in professional sectors, interdisciplinary talent and engineering and technical talent.

Finally, efforts should be devoted to enhancing Hong Kong’s appeal to overseas talent. Hong Kong’s high living costs are a deterrence for some people looking to pursue a long-term career in the city. Support measures should therefore be rolled out to make living in Hong Kong easier for overseas talent and entice them to settle in the city. These could include incentives and support policies regarding housing, family care, children’s education and taxation. The aim is to incentivise high-calibre talent to stay and work in Hong Kong on a long-term basis, which should ultimately contribute to the development of the GBA.

Making Use of the Mainland Market to Tap New Opportunities
When it comes to the innovation and technology sector, some respondents felt that Hong Kong’s world-leading academic research projects had only been put to rather limited commercial use, partly because of their excessively academic nature, and partly because of the small size of the Hong Kong domestic market. Local start-ups, too, often concentrate exclusively on the Hong Kong market, making it hard for them to scale up their business.

PwC considers it important for Hong Kong to maximise opportunities in the GBA to develop its academic research and start-ups. Businesses should be encouraged to engage in R&D and product and technology trials in Hong Kong while carrying out mass production and business expansion on the mainland. Hong Kong departments and organisations should cooperate with start-up incubators and mainland bodies to secure greater support in terms of funding, land, manpower, housing and taxation for Hong Kong academic researchers and start-ups during their initial development. Hong Kong could also set up a platform for exchanges between Hong Kong start-ups and mainland organisations by staging industry exchange sessions. Local start-ups should also be motivated to break into the mainland and global markets.

Hong Kong possesses a cluster of local and international talent and a well-established infrastructure, both of which are particularly conducive to the growth of fintech, artificial intelligence and air transport. As such, Hong Kong should watch closely over the development of these three sectors.

Promoting Cooperation and Complementarity

Promoting exchanges on all fronts is a crucial step if greater connectivity within the GBA is to be achieved. Some respondents commented that communication among the different governments in the GBA has yet to be improved, largely because the culture, ideology and language differ from region to region. Governments should make efforts to overcome their cultural differences, step up dialogue among various sectors in the different parts of the GBA, draw up targeted solutions to problems and devise policies to foster connectivity and cooperation within the GBA. The Hong Kong and mainland governments must also seek to strengthen their communication with different industries and encourage them to air their views and suggestions proactively. This could be achieved through, for example, helping Hong Kong companies organise industry exchange meetings on the mainland or inviting outstanding mainland enterprises to host talks in Hong Kong.

Based on the observations on a number of respondents, PwC found that over the past few decades, many successful Hong Kong entrepreneurs have been able to exploit their full potential and grow into sizeable establishments on the mainland. Today, they are among the most competitive multinational corporations in the world. The mainland has a huge population and a rapidly rising middle class constantly looking to improve its quality of life. The sheer size of the market these factors have created, and the wide range of industries on the mainland, have provided Hong Kong talent with a great diversification of career choices. As mentioned in the previous section on talent development, if Hong Kong wants to penetrate the mainland market further, the city must first encourage local students to gain a better understanding of the mainland’s multi-faceted culture and market opportunities by stepping up exchanges between the two places.

While Hong Kong’s world-renowned universities produce top-grade research institutes and first-rate talent, their lack of actual business experience makes it hard for them to translate their academic knowledge into commercially viable products and services. Hong Kong should persuade the mainland government to introduce more employment support policies for people from Hong Kong, aimed at making it more attractive for them to work or live in mainland cities. These policies could include relaxing the threshold for Hong Kong people applying for housing designed to attract non-local talent or retain local talent without a property. Some respondents suggested that the authorities should help SMEs break into the mainland market. One proposal put forward was for the establishment of a “Hong Kong SME community” on a site leased from the mainland government. Rent concessions would be offered to Hong Kong enterprises starting their business on this site, and special tax arrangements would be put in place for people recruited from Hong Kong. This could incentivise Hong Kong talent to pursue a career on the mainland, where they can avoid Hong Kong’s high land costs.

Some respondents observed that Hong Kong’s advantages are diminishing as a result of the rapid growth of other GBA cities. Hong Kong is facing competition, for example, from the increasing number of free trade zones which offer a business environment comparable to Hong Kong’s. It is therefore important for Hong Kong to make the most of its own strengths, working with other GBA cities to devise policies which complement each other’s strengths and benefit everyone. Hong Kong possesses first-rate higher education institutions and human resources, transparent systems and sophisticated management experience, while Shenzhen commands advantages in new- and hi-tech sectors and the manufacturing industry. Hong Kong can send its high-calibre talent, with its global outlook and excellent management experience, to Shenzhen; Shenzhen, in return, can offer a favourable environment for R&D work. The two places should forge closer links and try to attain synergy in their development. With more interactions between people on both sides, in particular with Hong Kong people working in mainland enterprises, ties between Hong Kong and the other GBA cities can be further cemented. As GBA enterprises learn about how Hong Kong’s practices and capabilities accord with international norms, the more likely they are to take on Hong Kong talent and offer them better development opportunities. This talent may then bring business opportunities back to Hong Kong companies within their own networks, ultimately promoting the city’s overall economic development.
The mainland market is currently opening up progressively. As GBA cities look to bring themselves in line with the global market, Hong Kong, with its market-led free economy, is in an excellent position to help their gradual transformation and familiarisation with the market economy model. With mainland cities heading towards a market-led economy, Hong Kong can play the role of the “innovator and facilitator” to steer other GBA cities towards further opening up. To do this, it can use its advantages and accumulated experience in the global market as well as its links with the mainland and its understanding of the mainland culture. In the process, the city can also strengthen its own status as an international business hub, helping the mainland open up further in the areas of investment and capital flow.
Ramping up Policy Implementation
A number of respondents pointed out that since the GBA plan was drawn up, many mainland governments had been looking to cooperate with Hong Kong to make it easier for enterprises on both sides to expand their business. They added, however, that there was still room for improvement in terms of the effort and speed with which Hong Kong was pursuing these policies. Respondents suggested that Hong Kong should foster a better understanding of the development trends of emerging businesses and formulate and implement corresponding policies more promptly. Hong Kong organisations must make strenuous efforts to create an environment conducive to innovation and embrace an innovative mindset in order to propel the city’s economic growth.

Hong Kong could model its approach to new concepts and ways of thinking on that of the Central Government, which tests the feasibility of new ideas by launching pilot schemes in a certain sector or area. If they work, they can then be implemented across a wider scope. Some respondents suggested that the Hong Kong government could help enterprises set up bases, and then use the growth of these enterprises to spur the development of Hong Kong’s technology industry, achieving a win-win outcome. Others wanted the government to put more effort into generating opportunities for cooperation among enterprises and steering the development of the local market and local companies.

While keeping to the principle of “small government”, Hong Kong should nevertheless try to identify what the market needs, launch financial support measures, devise long-term plans and draw up measures to sustain various industries’ vibrancy. Some respondents believed that there was still a lot more that the Hong Kong government could do. For instance, it could consider lobbying government departments and organisations in Belt and Road countries and regions to provide preferential investment policies for Hong Kong firms. It could also negotiate with the relevant governments to provide a site for a Hong Kong SME start-up park, where SMEs would be given subsidies to help overcome the obstacles encountered in the start-up stage, and thus eliminate the need for enterprises to deal directly with the governments themselves.

Many respondents also said that as well as the problems of policy implementation, the application procedures for many government incentives and subsidy schemes are cumbersome and time-consuming, and the subsidy level is too low. Assistance for businesses is very limited. Hong Kong organisations therefore need to streamline their application procedures, while maintaining the fairness of the schemes. A rating mechanism could be instituted to provide targeted subsidies at the right time to enterprises that need them. This would ensure that effective support could be given to Hong Kong companies as they expand and that businesses are better motivated to innovate.

Reinventing Hong Kong’s Image
According to some respondents from Hong Kong, the city’s organisations still adhere to the all-too-familiar, long-heralded themes of the “rule of law”, “free capital market” and “trading centre” when publicising Hong Kong. To maintain Hong Kong’s status as an international business hub, the strategy for promoting the city’s image must be reinvented. Firstly, Hong Kong should put more emphasis on its status as a “biliterate and trilingual” society, and encourage and assist foreign-invested enterprises expanding into the mainland market to first establish a foothold in Hong Kong. Secondly, customised publicity strategies should be devised depending on the business operator’s perspective. For example, for foreign-backed enterprises, the focus should be on promoting Hong Kong as an “ideal springboard” for entering the mainland market. Among mainland enterprises, however, Hong Kong should be sold as an “important gateway” for going out to the global market.

Optimising Resource Deployment Among GBA Cities
Among the “9+2” GBA cities, different cities have their own policy considerations and inclinations. Respondents commented that in order to deploy resources effectively across the GBA, different cities should collaborate to drive “differentiated development”, complementing each other’s functions and joining forces to build the “GBA brand”. Hong Kong possesses a world-class higher education sector and talent pool, transparent systems and sophisticated management experience, which can be readily exported to the mainland. Mainland cities, meanwhile, have abundant land resources and lower manpower costs than Hong Kong, and different sectors in various regions also have their own unique characteristics. Efforts should therefore be made by the relevant GBA authorities to formulate and implement specific measures to coordinate development in different parts of the GBA. There are, for example, a number of high-quality, small-scale innovative enterprises in the GBA which could cooperate with Hong Kong’s fintech sector to provide assistance and technical support to Hong Kong’s traditional service enterprises as they look to adopt new technologies like fintech. Action should also be taken to encourage local enterprises to collaborate with other GBA cities whose innovation and hi-tech sectors are more advanced. Successful innovation enterprises in these cities could be brought into Hong Kong to make better use of the city’s facilities, such as the Hong Kong Science Park and Cyberport. The Hong Kong government should work with mainland authorities to coordinate the efforts made by innovative and hi-tech enterprises in both places to venture into each other’s territory, establish closer ties and complement each other’s strengths.
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