It’s been a privilege to live in Hong Kong. The city has always been on the edge, a what-if place so to speak. So many things could have gone wrong in its modern history, from when the colony was turned over to China in 1997, to SARS in 2003, the financial crisis in 2008/09, the Occupy Central demonstrations etc etc. It has always bounced back and remains a unique sphere of the Western world surrounded by China and the rest of Asia.
Hong Kong has also been an incremental part of this thriving southern region of China. Just across the border there is Shenzhen, the place where Deng Xiaoping famously called for the commencement of China’s economic reforms in 1992, a tour emulated by the current president Xi Jinping in 2012. Deng laid the foundation for China’s capitalist system, and Shenzhen and its wider surroundings have since become a fertile ground for business creation.
The overall area, as you will know, is called the Pearl River Delta, a triangle of interwoven cities with Guangzhou at the northern tip and the Pearl River merging with the South China Sea being flanked by Macau and Hong Kong. The development of the region has progressed at neck-breaking speed and has become the most economically dynamic part of the Mainland, by now also encompassing Dongguan, Foshan, Zhongshan, Zhuhai and Jiangmen.
It has also become one of the most densely urbanised area in the world and is often considered an emerging megacity. Its population is estimated between 65-120 million people, depending on how wide your definition of the Pearl Delta is in the end. It has been referred to as a megalopolis, as in megaregion or supercity. At the upper end of the range, it resembles the size of Japan or Mexico.
The Pearl River Economic Zone accounts for approx. 10% of China’s GDP and almost 30% of the country’s exports. It is simply an economic powerhouse that keeps growing by 8-10% per annum, for above China’s average. Special economic zones emulating Hong Kong’s ease of business and tax system are mushrooming wherever you look, and infrastructure is being built on a huge scale to pave the way for coming decades.
Integration within the sphere of the delta is everything. You will have heard of the Hong Kong-Zhuhai-Macau bridge, a complex sea-crossing project including two bridge sections and two artificial islands connected by a mid-sea tunnel, which is to open next year and connect Hong Kong and its airport on the east of the delta with Macau and Zhuhai on the west. Travel time is estimated to be 45 minutes.
It apparently doesn’t stop there with regards to east-west connectivity. As one of my banking ex-colleagues, Ben Simpfendorfer, who now runs advisory shop Silk Road Associates, reports on LinkedIn, progress is being made on a second bridge about 60 kilometers north of Hong Kong. It is much further in the heart of the Pearl Delta, and on the face of it almost appears like it will cut Hong Kong off by the knees.
As the Delta’s development has progressed, Hong Kong has struggled to keep up with commercial giants in Shenzhen and Dongguan across its northern border. The new Shenzhen-Zhongshan bridge will be another connectivity booster but also potentially a game changer, according to Ben. The travel time of only 20 minutes between Cuiheng New District and particularly the Qianhai SEZ will make a huge difference with workers being able to easily commute.
Qianhai on the eastern coast of the delta, to the west of Shenzhen and just north of Hong Kong, has emerged as a newly established special economic zone and resembles Hong Hong by many measures, such as the emerging density of skyscrapers and most notably the match of income tax levels. It is one of the fastest growing areas in the delta and gradually becoming a competitive force to Hong Kong to do China-related business.
The development trend within the delta is unstoppable. Either you outrun the pace the Mainland has adopted, or you will lose out eventually. Hong Kong is now almost on the outskirt of the action but still has a few aces up its sleeve. One, it remains a massive surplus country, and investment into infrastructure such as the soon-to-open fast rail connection with Shenzhen and Guangzhou, the third runway on Check Lap Kok airport, and the HK-Macau bridge is essential.
Next to being firmly connected to the Delta, Hong Kong is the only place that can still play the card of not being China, at least in terms of its legal system. The region clearly depends on international trade, and Hong Kong is the only reliable geography for arbitration. This advantage will not be lost on the SAR for a while to come.
And finally, it is encouraging to see the incredible influx of China’s money and its development and construction industry in the city, and the build-up of so many more of those Manhattan-like pads for affluent Mainlanders.
