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October 25, 2018

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Complementary bay areas to work together

WHEN Charles Dickens wrote “A Tale of Two Cities,” he probably didn’t expect his novel would inspire dozens of modern-day “tales” of two cities, two countries, or two bay areas.

If there is a thread running through Anthony Leung Kam Chung’s October 21 speech at Fudan University, it is that China is creating its own tale of two bay areas, one comprising eastern cities like Shanghai, the other linking cities in southern Guangdong Province, Hong Kong and Macao.

“These two bay areas have been economic powerhouses and they will continue to be in years to come,” Leung, chairman of Hong Kong-based Nan Fung Group, said at a ceremony marking the 20th anniversary of the dual-degree IMBA program jointly offered by Fudan University and the University of Hong Kong.

The Guangdong-Hong Kong-Macao Greater Bay Area, first proposed in a policy paper in 2015, gradually took shape as Hong Kong, Macao and nine other cities in Guangdong merged to form a city cluster of 66.7 million people.

Shanghai, for its part, has been at the center of a Shanghai-Hangzhou Bay Area that includes cities like Ningbo, Hangzhou and Suzhou with a total population of 83.7 million.

“These two bay areas are similar in size, population and GDP,” said Leung. “Instead of competing with each other, they should cooperate.”

He was referring to discussions that Shanghai, with its bid to become a financial hub and high-tech center, is going to overshadow Hong Kong as a free port and financial center.

Leung quelled such concerns, explaining that the two bay areas are unique, despite shared strength in high-tech manufacturing.

They are home to tech companies like Tencent and Alibaba, but the Shanghai-centric bay area may outdo its southern counterpart in terms of hardware manufacture, while a handful of biotech firms like BGI in Shenzhen give that region a head start in a potential gene revolution.

These two areas, said Leung, are often compared to three world-class bay areas surrounding San Francisco, New York and Tokyo, home to not just big-name tech firms like Apple, but important financial institutions as well.

Making sense

In the short and medium run, Leung suggested that these two bay areas adopt more measures in support of reform and opening-up.

This is already happening as governments at all levels introduce investor-friendly policies.

Cooperation between Shanghai and Hong Kong has always been good in areas like finance.

Hong Kong is the world’s largest offshore market for settlement in yuan, and officials are considering closer links between Hong Kong and Shanghai, the biggest financial market on the mainland. Such links will be a significant step toward internationalizing the yuan, Leung noted.

That said, the veteran investor and former financial secretary of the Hong Kong Special Administrative Region believes Hong Kong has advantages that cannot be easily supplanted.

A relatively lax regulatory environment is an example.

According to him, mainland biotech companies that fail to turn a profit in three successive years are barred from being listed on Shanghai’s A-share stock market but remain eligible to file on Hong Kong’s Hang Seng Index.

For research-oriented companies that literally burn cash to stay alive, access to funding is key to their survival.

He noted that the central government could consider funds to Hong Kong universities, so that they too can profit from programs to bring top talent from all over the world.


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