Greater Bay Area can be a boon for HK

Hong Kong has played a significant role in the Chinese mainland's economic development. When the mainland launched reform and opening-up four decades ago, Hong Kong merchants, with roots in Guangdong province, took the lead in investing in mainland projects, especially those in Guangdong. Which laid a solid foundation for Guangdong to play a pioneering role as a manufacturing base and lead the mainland's fast-paced economic and social development.

Statistics show Hong Kong has been the largest source of overseas investment for the mainland since the launch of reform and opening-up. Long-term investment through Hong Kong accounts for about 70 percent of the mainland's overseas investment. Hong Kong has also been a major destination for mainland enterprises seeking to "go global". In fact, the first destination for about 70 percent of mainland service companies' overseas investment is Hong Kong.

And thanks to its proximity to Hong Kong, Guangdong's imports and exports, which account for more than 25 percent of the mainland's total, increased from $1.6 billion in 1978 to more than $1 trillion in 2018.

Economic cooperation between Guangdong, and the Hong Kong and Macao special administrative regions boosted the mainland's reform and opening-up, and helped it integrate with the global industrial value chain. In the past four decades, Guangdong, Hong Kong and Macao have experienced two large-scale economic integrations, which have deepened their cooperation.

The industrial economy integration lasted from 1978 to 2003, during which a vertical division of labor was established wherein Hong Kong took charge of services while Guangdong focused on the production of goods, which made the Pearl River Delta region the "world factory". And Hong Kong transformed from an export-oriented manufacturing base to a global trading, financial and shipping hub.

The service economy integration began in 2003. For example, the Closer Economic Partnership Arrangement that promotes trade in service helped further integrate the service industries of Guangdong, Hong Kong and Macao.

In the meantime, the mainland's foreign trade increased with each passing year, especially after it entered the World Trade Organization in 2001, with its foreign trade dependence rate increasing from 34 percent in 2001 to 64 percent in 2006. The rapid increase of foreign trade in a relatively short time expedited the mainland's economic development and added to Hong Kong's prosperity.

After the 2008 global financial crisis, China decided to change its foreign trade-oriented growth model to one driven by domestic demand. As such, China's foreign trade dependence rate declined drastically from 64 percent in 2006 to 34 percent in 2017. Over the past 10 years, domestic demand has become the crucial force driving China's economic development. And while the country's per capita GDP surpassed $9,000 in 2017, per capita GDP of the under-construction Guangdong-Hong Kong-Macao Greater Bay Area reached $22,000 and that of the Pearl River Delta region, $17,900, making it a high-income region according to UN standards.

Over the years, Hong Kong has played a liaison's role between the mainland and the world. By so doing, it has helped boost the mainland's foreign trade, and increased Hong Kong's GDP from HKD1.35 trillion ($172.74 billion) in 1997, the year it reunified with the motherland, to HKD2.85 trillion in 2017, registering an average of 3.8 percent growth per year, which is higher than the average growth rate of developed economies over the past 20 years.

But after 2008, Hong Kong failed to capitalize on the mainland's transition to a domestic demand-driven economy, perhaps because its enterprises and specialized service sector focus more on the global market. The fact that the markets of Guangdong, Hong Kong and Macao are separated might have also prevented Hong Kong companies from fully enjoying the dividends of the mainland market.

The trade row between China and the US has further squeezed the space for Hong Kong enterprises to expand abroad. As a result, an increasing number of Hong Kong companies are eager to explore the mainland's market, and more and more Hong Kong residents consider the mainland an ideal place for start-ups, innovation and business development.

That many Hong Kong-based companies have greatly benefited by investing in mainland projects suggests they can also benefit from the integration of the Guangdong, Hong Kong, Macao markets. And since mainland enterprises are already looking forward to cash in on the integrated Guangdong-Hong Kong-Macao market, the future of the Guangdong-Hong Kong-Macao Greater Bay Area indeed looks bright.

So Hong Kong companies should play a bigger role in the country's overall development, in order to better cope with the fast changing global trade situation, especially because they can use the Greater Bay Area to their advantage to facilitate high-quality economic development.

The author is director of the Institute of Studies for the Guangdong-Hong Kong-Macao Greater Bay Area, Guangdong University of Foreign Studies. The views don't necessarily represent those of China Daily.