Rapid GDP growth across the border may diminish SAR's traditional intermediary role

The aggregate per capita GDP of Guangzhou and Shenzhen is poised to surpass that of Hong Kong within 10 years, cautioned the Bauhinia Foundation Research Centre, a Hong Kong policy think-tank, on Tuesday.

The foundation urged that the city spare no effort in securing its interest in the fast-growing market of Guangdong, with a population of 100 million.

At the same time, Hong Kong must fight to maintain its competitiveness in the Pearl River Delta (PRD), the think tank said.

Mo Pak-hung, associate professor at Baptist University's Department of Economics, said the rapid GDP growth in Guangzhou and Shenzhen means people there enjoy higher purchasing power and better quality of living than they have done in the past.

It is unimportant whether they overtake Hong Kong, given its economy normally complements rather than competes with neighboring regions, he said.

Thus, it's good for Hong Kong to have such a big market and big-spending customers, he said.

Bauhinia Chairman Anthony Wu, while highlighting the research findings concerning Hong Kong's opportunities, said Guangdong province has long been the economic hinterland of Hong Kong.

As a result of its economic transformation after the financial crisis of 2008, Guangdong has vigorously developed its domestic market. Now both domestic and foreign enterprises are vying for a piece of that market. Guangdong's progression up the value chains is more evident this year, with the commencement of the 12th Five-Year Plan, he noted.

"Hong Kong must be forward-looking in grasping fully the future economic development trends, as well as opportunities and challenges brought by the advancement of their industries in the next five years, with a view to complementing each other and achieving a win-win situation," he said.

According to the report, global economic recession, rising costs and higher service demands triggered by greater wealth in society have prompted economic restructuring in Guangdong in recent years.

The economic restructuring affects Hong Kong in several ways, with the most obvious trend being that Guangdong relies less on Hong Kong as a channel for foreign direct investment, thus weakening the SAR's traditional intermediary role, the research found.

Wu admitted that GDP growth in Hong Kong is slower because it relies heavily on the financial industry, adding it should identify other strong areas such as health services, testing and certification services.

Wu called for optimizing the Closer Economic Partnership Arrangement (CEPA) and other cross-boundary policy platforms to promote further cooperation between Guangdong and Hong Kong.

For instance, he said, Vice-Premier Li has set the target of full trade liberalization for the Hong Kong service sector by the end of 2015 - the last year of the ongoing five-year plan.

The CEPA has opened the "big door" to the mainland market but the "small doors" are closed, Wu said.

The timetable for liberalization of trade services in Hong Kong and the mainland is there, and Hong Kong needs to work out a viable road map to implement the ultimate goal - together with annual goals - set by the Central Government, said Wu.

joseph@chinadailyhk.com

China Daily

(HK Edition 08/31/2011 page1)