15 Years after CIPA’s successful smoothening of economic exchange of goods and services between Hong Kong and its motherland under the One Country – Two Systems paradigm, China intends to allow further freedom of financial and employment exchange between Hong Kong and its 9 neighbor cities to create a “One Employment Area” allowing complementary sharing of tasks across the Pearl River Delta Bay Area. The infrastructure cooperation already starts with high speed train connection networks. In order to overcome the bottleneck on talent attraction through utterly expensive office and living space in Hong Kong, housing price gap shall closed by increased physical connectivity.
Encouraged by Shenzhen’s ubiquitous innovation culture proving entrepreneurship, the Bay Area shall develop to the needed supply chain to China’s industry. By developing talents and Technologies in an entrepreneurial way for making China’s industries globally competitive. This reminds me a lot of my times as a TIER 3 entrepreneur with special material solutions developments and supply to all big name OEMs in Europe, Japan and USA, giving our customers’ products competitive advantage in their markets. Right now the National Reform and Development Committee and China Government are to still working on determining the objectives for the Bay Area. But Technology content shall be raised up. And that will need free inter-flow of human and financial capital across the Bay Area. With that a 2030 objective to reach U$4.6trl GDP could make the Pearl River Delta Bay the economically strongest Bay Area in the world.
The growth is expected to come out of SMEs entrepreneurial spirit as everywhere in the world, where growth financing is the bottleneck. On the other hand U$120trl are hesitating to go into Infrastructure Gaps because of the long term illiquidity of infrastructure investments. SME growth financing on the other hand offers many new opportunities for shorter term liquidity. Hong Kong has the capital market for that, while Guangdong can do the manufacturing. The Pearl River Delta Bay Area could become a Silicon Valley of China with Hong Kong as the connector. So the bonds and securities market for local corporations is expected to pick up. 2018 is seen as a year of implementing changes and then see the reactions from the (international) market(s). Black Rock and 100 others have already applied for licenses to participate in bond Market in China.
Currently 15% of global Foreign Direct Investment comes from China. 50-60% goes through Hong Kong before going out further. And 45% of Hong Kong stock market’s current capitalization is from China. It opened up a new asset-class because China though being a major part of global finance is not really being connected otherwise. Though everybody wants to deal with China nobody is ready to adopt to the needs of China. So Hong Kong connects by netting out trade on both sides on a daily basis so that only the total net variances have to cross the border. Since this works without any adverse effect to the investors, many who tried going direct into for example Shanghai, voluntarily came back to Hong Kong. However, Hong Kong Financial outflow is currently primarily routed to the US & UK. But China’s foreign trade clearing gravity has been moving toward emerging and developing countries.
The South East Asian markets are to be seen bullish. Currently they are peering the Rest of World stock exchanges. Thailand, India, Philippines are now seen very optimistic – they are best for unfamiliar investors in baskets & Bonds. The Pearl River Delta Bay Area is the opportunity to build clusters for commercializing lots of scientific achievements of HKG. Several Private Equity firms start having Venture Capital affiliates already to build their own food chain by enabling layered capital provision for new companies. Therefore recently Game changing Technologies that could change Society have become popular targets, also in Hong Kong.