During the annual session of the National Committee of the Chinese People’s Political Consultative Conference held in Beijing last month, several Hong Kong Special Administrative Region members emphasized the significance of personnel exchanges in invigorating construction of the Guangdong-Hong Kong-Macao Greater Bay Area.
They highlighted the need to enhance complementary talents in Guangdong, Hong Kong and Macao to ensure the success of the national strategy for the city cluster’s development. However, the path toward progress is not without obstacles, and there is a pressing need to address the relationship between traditional and high-tech industries. The development of the bay area holds the key to Hong Kong’s prospects and requires careful consideration and planning.
The traditional sectors constitute the foundation of the current economies in Guangdong, Hong Kong and Macao. Hong Kong’s primary industries include finance, business services, trade and logistics, real estate and retail. In comparison, Macao is primarily focused on the gaming industry, and Guangdong province is dominated by export and manufacturing of electrical appliances like televisions, electric fans and refrigerators as well as items such as clothing, toys and footwear, but has begun to shift toward heavy and high-tech industries over recent years.
The fact that high-tech manufacturing accounted for only 29.9 percent of the value-added industrial output in Guangdong in 2022 highlights the continued significance of traditional industries and the real estate sector as the primary economic pillars. This trend is further confirmed by Hurun’s statistical data, which revealed that 30 percent of the world’s top-100 real estate tycoons hail from the GBA, and by the rich list published by Forbes magazine, which showed that many tycoons from the GBA made their fortunes in traditional industries.
Leveraging traditional industries to promote technological innovation
The traditional industries in the GBA indeed have a significantly supportive impact on the development prospects of high-tech industries. In a high-tech industry, because of the need for constant technological innovation, it is challenging to gain an advantage in the market and keep supply costs low, resulting in many failures and few successes. On the other hand, traditional industries have well-established business models and vast capital and business resources.
Furthermore, the continued presence and development of traditional industries not only affect the business ecology but also have a significant effect on the tax revenue of the governments in the GBA, which in turn can greatly support high-tech industries. Macao’s primary source of income is the gaming tax, while the HKSAR government relies on land premiums and stamp duties from transactions in the real estate and financial industries. Additionally, the Guangdong provincial government’s tax revenue is primarily concentrated in leading industries, with 80 percent of tax revenue coming from manufacturing, real estate, wholesale and retail, and financial industries. Thus, it is crucial for the governments of the three regions to carefully manage the relationship between traditional industries and high-tech industries, considering both market ecology and government revenue and expenditures.
The relationship between traditional industries and high-tech industries is a pressing issue that the governments in the GBA need to address. To reduce resistance to the development of the latter, the governments should guide traditional industries to support high-tech industries while guiding the latter to enhance the competitiveness of the former. However, if high-tech industries threaten to harm traditional industries and employment, the government must reconcile the relationship between the two by facilitating the transformation of traditional industries and investing in technological innovation companies. Additionally, the government must revise laws and industrial standards as necessary to regulate the conflict between traditional and high-tech industries. By doing so, the governments can actively promote support for high-tech industries while creating a market environment conducive to their development.
In sum, while the GBA planning prioritizes the development of high-tech industries, traditional industries remain a crucial pillar of the region’s economy. These industries have a significant impact on the prospects for high-tech industries by shaping the market ecology and government revenue and expenditures. Therefore, the governments of Guangdong, Hong Kong, and Macao must carefully consider the relationship between the development of traditional and high-tech industries, reduce resistance to the latter’s development, and implement their strategies accordingly.
The author, a chartered financial analyst, is a member of China Retold, and Beta Gamma Sigma, an international business honor society.
The views do not necessarily reflect those of China Daily.