China’s Greater Bay Area: Looking Beyond its Flagship Cities

• Developments in Shenzhen, Guangzhou, and Hong Kong frequently dominate headlines and government PR to establish the investment viability of China’s Greater Bay Area. The area, however, includes many other cities that will benefit from key regional infrastructure upgrades and market reforms.

In February 2018, China released its blueprint for developing the Greater Bay Area (GBA) during the Fourth Plenary Session of the 12th Provincial Party Committee. Internally called the “1+1+9” plan, its aim was to turn the GBA into a sprawling economic region reminiscent of Tokyo or San Francisco, integrating special zones Macau and Hong Kong more intimately with nine other mainland cities.

On May 14, 2020, the People’s Bank of China, along with three other central authorities, unveiled new guidelines to support the financial reform and opening-up of the GBA.

The Opin­ions Con­cern­ing Fi­nan­cial Sup­port for the Es­tab­lish­ment of the Guang­dong-Hong Kong-Macao Greater Bay Area (“the guidelines”) transcribe a series of 26 new measures aimed at liberalizing China’s controls on foreign exchange and foreign currency remittance, to boost cross-border capital flows in the GBA.

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The GBA project is thus now well under way – and will foster healthy inter-city rivalry to establish greater investment appeal and a climate of innovation. Guangzhou, Shenzhen, and Hong Kong are currently the largest and most prosperous cities in the region; the GBA plan expects them to differentiate their roles based on their strengths so they do not directly compete with one another. Shenzhen is expected to focus on technology and development, Guangzhou on transportation, and Hong Kong on finance and foreign investment.

But the GBA is also home to seven other cities in the mainland – Dongguan, Huizhou, Foshan, Zhaoqing, Jiangmen, Zhongshan, and Zhuhai. While some of them hold certain acclaim within the country, most have little name recognition outside China. From an investor’s standpoint, the growth potential of these under-reported cities could be much larger than their neighbors.

China watchers should take note of how these cities develop in relation to each other – their respective areas of development, including industrial and service sectors and key infrastructure linkages.

One way to predict their future course of development is to take a look at their recent past and examine existing industry strengths.

Dongguan

One of the mainland’s fastest-growing cities in terms of overall economic growth, Dongguan is located between Guangzhou and Shenzhen. It borders the Zhujiang River Estuary in the west and Huizhou in the east.

For almost a century, Dongguan was the political, cultural, and economic hub of much of the southeast tip of China. The expansion and growing independence of its subordinate cities brought Dongguan to its current stature by the second half of the 20^th century.

As of 2019, Dongguan’s GDP was about RMB 948.25 billion (US$137.45 billion).

Dongguan has created a comprehensive manufacturing system covering more than 60,000 types of products across 30 industries. One in every five smartphones in the world is produced in Dongguan. Its major industries include IT, electric, garment, shoe, toy, and furniture manufacturing.

The city boasts a highly efficient comprehensive logistics network as well as close proximity to international airports in Guangzhou and Shenzhen. It was among the first cities in China to adopt non-attended customs clearance upon verification.

Major development areas

• National level – Songshan Lake High-Tech Industrial Development Zone; and
• Provincial level – Dongguan Eco-industrial Park, Dongguan Waterfront Economic Development Zone, and Guangdong Equipment Technology Industrial Park.

Policy implications for the city from the 2019 People’s Congress (PC)

• Construction of a new Free Trade Zone (FTZ);
• Upgrading and expanding science and technology research institutions; and
• Increased retail industry expansion.

Due to Dongguan’s key location in the GBA as an intermediary between Shenzhen and Guangzhou, one of its primary tasks will be expanding as a transportation hub for the region. Extensive plans are already in place to upgrade the city’s highways, metro system, and high-speed rail connectivity.

Industrially, Dongguan is tasked by the 13th Five Year Plan to develop its financial insurance, e-commerce, and technology services. It has plans to jointly develop a comprehensive national science center with Hong Kong and Shenzhen.

Huizhou

Known as the “Eastern Gate of Guangdong”, Huizhou marks the easternmost reach of the GBA and shares a land border with Guangzhou, Dongguan, and Shenzhen. It has the second largest area among the mainland GBA cities and a population of about 4.83 million. The city is well-known for its scenic environment and abundant natural resources.

It’s current GDP is estimated by government reports to be at about RMB 417.7 billion (US$60.6 billion).

Huizhou’s two major industries are petrochemicals and electronic information. These currently boast production values of up to RMB 1 trillion (US$140 billion). Huizhou’s Daya Bay Petrochemical Zone ranks the first in the country in terms of scale of petrochemical-refining integration. Huizhou’s Zhongkai High-Tech Industrial Development Zone is an important national base for the electronic information industry.

Major development areas

• National level – Daya Bay Economic and Technological Development Zone and Huizhou Zhongkai High-Tech Industrial Development Zone;
• Provincial level – Daya Bay Petrochemical Industrial Park, Huizhou Industrial Park, Huiyang Economic Development Zone, Bolou Industry Transfer Industrial Park, Huidong Industry Transfer Industrial Park, and Huizhou Industry Transfer Industrial Park; and
• Major platforms – Pan Daya Bay New District, Tonghu Ecological and Smart Zone, and China – South Korea (Huizhou) Industrial Park.

Policy implications for the city from the 2019 PC

• Creating a “world-class” petrochemical base;
• Strengthening the city’s electronic industry base;
• Expanding innovation in Chinese medicine;
• The establishment of a China-Korea industrial park;
• Accelerated construction of special customs supervision zones and B -type bonded logistics centers;
• Increased transportation infrastructure to connect to the rest of the GBA; and
• Investment in family farms and cooperative farms.

Due to its location and current connectivity, Huizhou will likely continue to expand its connection with China’s east coast as well as neighboring countries like Korea. Already the city is working on constructing a large central airport said to be capable of putting through 10 million passengers.

Foshan

Translating roughly to “Buddha Mountain,” Foshan is well-known in China as a former center of Buddhism in Guangdong. The city was known internationally for its ceramics and silk well into the early 20^th century before local disputes and cycles of international depression brought about the downfall of both industries.

Foshan borders Guangzhou to the east, Zhaoqing to the northwest, Jiangmen to the southwest, and Zhongshan to the south, making it another major connection point in the GBA master plan. Its logistics and transportation networks are already heavily integrated with Guangzhou. A subway line currently connects the two cities.

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In 2019, Foshan’s GDP was roughly RMB 1075.1 billion (US$155.9 billion). It is known for having among the highest GDP per capita in the region.

Industrially, Foshan mostly focuses on electronic appliance manufacturing.

As of 2015, the city was home to over 3,000 electrical appliance factories (about half foreign-invested) and produced 20 percent of the output for China’s electrical appliance industry. The city is home to Shunde, the largest Chinese production base for air-conditioners, refrigerators, and electric gas heaters and the largest global production base for electric rice cookers and microwave ovens. It was estimated in 2015 that Shunde factories accounted for half the world’s air conditioners and refrigerators.

The city has additionally become the headquarters for several well-known car manufacturers.

Major development areas

• National level – Foshan National High-Tech Industrial Development Zone; and
• Provincial level – Foshan Nanhai Economic Development Zone, Foshan Chancheng Economic Development Zone, Foshan Nanhai Industrial Zone, Foshan Gaoming Cangjiang Industrial Zone, Foshan Sanshui Industrial Zone, and Foshan Shunde Industrial Zone.

As per media reports in September 2019, Guangdong’s vice governor, Chen Liangxian, stated that Zhuhai and Foshan would lead the development of an advanced equipment manufacturing industrial belt on the west bank of the Pearl River. Foshan has also been a leading source for industrial technology investment in Guangdong.

Foshan plans to leverage its high level of development and connectivity to become a “hometown for young people” in the region.

Zhaoqing

Sometimes called the “Home of Gold” due to its numerous gold mines, Zhaoqing is located to the west of Foshan and Jiangmen. It has the largest land area of the GBA cities (14,891 km²) and very well-developed transportation networks. It is home to one of the most important inland ports in China, the Zhaoqing New Port.

Between the sixth and 16^th centuries, Zhaoqing was an important military and political center for the region. For centuries it was known as the “capital of inkstones in China.”

In 2019, Zhaoqing’s GDP was RMB 224.9 billion (US$32.6 billion).

Zhaoqing has an expansive mining and tourism industry. Some sectors for mining include limestones for cement, limestones for flux, gypsum, granite for overcoating, granite for construction, porcelain clay, ink-stone, mineral water, and geothermal water.

Major development areas

• National level – Zhaoqing High-Tech Industrial Development Zone; and
• Provincial level – Zhaoqing Industrial Park.

Policy implications for the city from the 2019 PC

• Expansion of new modes of cross-border e-commerce;
• Acceleration of the Zhaoqing New District Comprehensive Bonded Zone and the Sihui Bonded Logistics Center;
• Accelerated construction of high-quality network services in the Zhaoqing Expressway;
• The establishment of 20 new research and development institutions and 25 high-level technology business incubators; and
• Promotion of the construction of the “three cores and nine rings” power grid target grid, information network, municipal and water conservancy projects.

As one of the westernmost cities in the GBA, Zhaoqing will likely continue focus on linking the region to China’s southwest. Currently, predominant investment into the city is focused on its tourism sector and urban development.

Jiangmen

Jiangmen is located to the west of Foshan, Zhuhai, and Zhongshan and serves as one of two western gates into the region. It has eight expressways connecting it to other cities and has been integrated into the “1-hour economic circle” of the Greater Pearl River Delta. It has two class-one cargo ports – Xinhui port and Taishan Guanghai port.

Jiangmen was historically under the administration of Xinhui county until it became an official city in 1952. It was among the regions that was forced to open to western trade in 1902, but its development was stunted by the growth of nearby Guangzhou and Hong Kong during the great depression of the 1930s.

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In 2019, Jiangmen’s GDP was RMB 314.7 billion (US$45.6 billion).

While Jiangmen currently lags somewhat behind its neighbors in terms of overall production, it has developed a fairly-advanced industry for motorcycles and auto parts manufacturing, textiles and garments, paper-making, shipbuilding, food, packaging materials, bathroom accessories and sanitary hardware, printing, and electromechanics.

It is also a key source for agricultural products and by-products for the Pearl River Delta, Hong Kong, and Macau and the first agricultural cooperation pilot zone with Taiwan in the Guangdong province.

Jiangmen has been rapidly developing its new energy, new lighting, new materials, high-end equipment manufacturing, and green household appliances industries.

Major development areas

• National level: Jiangmen High-Tech Industrial Development Zone; and
• Provincial level: Xinhui Economic Development Zone, and Taishan Guanghai Bay Industrial Park.

Highlights from the 2019 PC

• Drastically increase the number of “talented workers”;
• Construction of Zhuxi logistics hub;
• Outreach to Chinese youth abroad to come back and innovate within the city;
• Reduction of commercial registration time to three working days; and
• Heavy infrastructure investments in the city and countryside.

Jiangmen currently has the lowest population density of any of the other GBA cities. Most city’s efforts in the near future will likely focus on urban development, transportation, and attracting new talent. Jiangmen is currently known for being the home city for a large percentage of Chinese living abroad. The city’s PC report seems to imply they wish to lure a portion of this demographic back to the city to help increase innovation and commerce.

Zhongshan

Zhongshan, the birthplace of former Republic of China prime minister Sun Yat-Sen (Sun Zhongshan in Mandarin), is located just south of Foshan and shares borders with Guangzhou, Zhuhai, Jiangmen, and the Pearl River Delta. It is a key transportation node on the Pearl River Delta.

Zhongshan has seen many conflicts. It was the sight of multiple skirmishes in the Opium Wars in the mid-nineteenth century and later was occupied by the Japanese during the Sino-Japan war. Finally, it was the last holding for the Republic of China troops as they were forced out of the country by the Peoples’ Liberation Army. Zhongshan was previously known for its sea salt trade.

Zhongshan’s 2019 GDP was RMB 310.1 billion (US$45.0 billion).

The city serves as the base for many large-scale industrial projects started by central government-level state owned enterprises, including the State Shipbuilding Corporation, China Railway Group, and China National Offshore Oil Corporation.

Major development areas

• National level: Zhongshan Torch High-Tech Industrial Development Zone; and
• Provincial level: Zhongshan Industrial Park.

The only bonded logistics center on the west bank of the Pearl River Estuary is located in Zhongshan.

Highlights from the 2019 PC

• Speed up docking in the Nansha, Qianhai, and Hengqin Free Trade Zones;
• Creation of a new area of the FTZ;
• A Guangzhou metro extension to Zongshan;
• Creation of a Guangdong, Hong Kong, and Macau Dawan Area Biomedicine International Cooperation and Innovation Zone; and
• Add 200 additional atmospheric micro-observatories to improve weather warning and control capabilities and response times.

Zhongshan was specifically singled out in the GBA masterplan to become the regional transportation hub for the west side of the bay. It is planned that Zhongshan will be connected to the other 11 cities in the region through a railway network.

Zhuhai

Zhuhai is located at the confluence of the Pearl River Delta and the South China Sea. It shares land borders with Zhongshan to the north and Macau to the south.

Zhuhai has been a city for only a little under a half-century. Before it was established as a county in 1953, it was only a handful of fishing villages. It became a full city in 1979 and was given Special Economic Zone status in 1980.

In 2019, Zhuhai’s GDP was about RMB 343.6 billion (US$49.8 billion).

Six major industries in Zhuhai are electronic information, home appliances, electricity and energy, biopharmaceuticals and medical devices, petrochemicals, and precision machinery. Its special industries are printing supplies and yacht manufacturing.

Zhuhai’s largest manufacturer is Gree Electronics, the self-proclaimed “king of the world” for home appliances, specifically air-conditioners. They are currently the world’s largest manufacturer in this area.

Major development areas

• National level: Zhuhai Economic and Technological Development Zone, Zhuhai High-Tech Industrial Development Zone, Zhuhai Bonded Zone, and Zhuhai-Macau Cross-border Industrial Zone;
• Provincial level: Zhuhai Fushan Industrial Park, and Zhuhai Jinwan Liangang Industrial Park; and
• Hengqin Island SEZ.

Highlights from the 2019 PC

• Increased land guarantees for Gree electronics;
• Talk of turning Zhuhai into a “bus city” with investment in electric buses and bus infrastructure;
• Beautification the outlying islands in the Zhuhai Free Trade Zone (FTZ) in part to bolster of the coastal tourism industry;
• Construction of a provincial-level marine science and technology specialty town; and
• Construction of a cross-border e-commerce comprehensive test area with Macau.

Zhuhai is already considered a very well-developed city with a “first-class living environment”. It will likely work to further improve its relationship with close neighbor, Macau, to expand its industry and workforce. Sizable effort seems to be currently being put towards Zhuhai’s ecological conservation and coastal tourism industry, which will likely expand to accommodate Macau’s increased role as a regional leisure center.

Macau

Macau is located on the western side of the Pearl river estuary and is joined with Zhuhai to the north. It is only 60 km across the sea from Hong Kong.

In 1553, the Portuguese colonized Macau, creating the first European colony in East Asia. For the following centuries, it was a major port for global commerce. The city’s influence began to decline in the early 19^th century after the Opium Wars brought the British to the region and created a massive port in Hong Kong. The city was finally relinquished to the Chinese government in 1999.

In 2019, Macau’s GDP was MOP 434.7 billion (US$54.17 billion). Macau has had strong economic growth since its establishment as a special administrative region with its gambling and junket (operators that work with casinos to bring wealthy VIP gamblers to the city) industry making up the backbone of its economy. Due to its open economic policy, Macau’s tax rate is one of the lowest in the region. The city enjoys unlimited foreign exchange and claims its own customs territory.

Macau’s responsibilities as part of the GBA include promoting business cooperation with Portuguese-speaking countries and its image as a multicultural Chinese city to the world. It has created a Macau Young Entrepreneur Incubation Center to aid its young workforce in taking advantage of new favorable hiring policies for young locals in the GBA. Macau will also likely continue working on expanding its tourism and gambling industries in its role as the leisure center of the GBA.

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