Hong Kong and Guangdong need to get in step to achieve future growth through integrated development
Anthony Cheung 22 December 2008
The fate of Hong-Kong-owned small and medium-sized enterprises in the Pearl River Delta region has exposed once again the vulnerability of many such businesses. This is especially so in the face of Guangdong’s recent attempts to upgrade its industrial structure, partly by pushing away low-value-added and heavily polluting industries. And it has been made worse by the latest credit crunch caused by the global financial tsunami.
The city’s local manufacturing sector has been steadily hollowed out since the mainland opened up three decades ago. Now, any talk of reindustrialisation cannot begin without taking into account the larger Pearl River Delta scene.
Guangdong also faces its own restructuring problems. Being one of the first beneficiaries of economic reform and opening up, by last year it had become the world’s 21st-largest economy. After 30 years of reform, its agricultural sector has shrunk from 29.8 per cent to 5.7 per cent while its tertiary and services sector now accounts for 42.3 per cent of its economy. Its urban population jumped from 17 per cent to 65 per cent of the total.
It is now much more externally dependent and has to maintain competitiveness in a more complicated, globalised environment. The main challenge is how to move to the next stage of industrial upgrading, and to a post-industrial and knowledge-based economy.
Meanwhile, Shanghai and the Yangtze River Delta region have caught up fast, displaying even more vibrant economic dynamism.
Guangdong has good reason to seek a new mode of reindustrialisation, but Hong Kong industries have reached a stage where they can no longer depend on the low production costs in the Pearl River Delta region. Hong Kong exploited the mainland’s economic and political turbulence, then its opening up, to benefit its own industrialisation, and then its industrial relocation as it advanced to become a financial and services hub. The next decades cannot be a replication of earlier phases. Growth and affluence can come about only through integrated development, to achieve co-prosperity.
As both Hong Kong and Guangdong move up the industrial ladder, they may both benefit from regional collaboration and complementary growth. They probably also need a regional solution to provide jobs for low-skilled workers. Environmental protection and transport infrastructure are other areas calling for an integrated strategy.
Most people recognise the growing interdependence of the two economies. At the government level, both sides seem willing to strengthen collaboration. It is no secret that, under the new leadership of Guangdong party chief Wang Yang , provincial officials and think-tanks are keen to factor Hong Kong into its grand plan for grooming a greater Pearl River Delta world-class metropolis. In Hong Kong, the Bauhinia Foundation Research Centre published a report in October urging the acceleration of economic integration, using the same language and logic as Guangdong.
However, the long-standing emphasis on separation between the “two systems” has sometimes prevented the consolidation of a much-needed new regional outlook. Three major problems remain.
First, much of the enthusiastic talk about integration is still rhetoric, not really backed up by concrete, workable measures. The sense of mutual benefit has yet to take root, as illustrated by Guangdong’s unilateral industrial upgrading measures without full regard to the reaction of Hong Kong’s small and medium-sized enterprises, which have also shown little sympathy for the economic needs of the province.
Second, unlike the European Union, where, despite national boundaries, there exists a high degree of institutional affinity and shared social values, Hong Kong and Guangdong do not necessarily share a common identity.
Third, both differ greatly in their developmental thinking, strategies and policymaking mechanisms.
Guangdong essentially adopts a state-led development approach while Hong Kong is still deciding between non-interventionism and some degree of government action. Whereas mainland governments could push things ahead rather quickly, Hong Kong has a structurally weak government.
Clearly, one cannot assume that the two sides will be able to tango in perfect unison.
Anthony Cheung Bing-leung is an executive councillor and a founder of SynergyNet, a policy think-tank
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It Takes Two to Tango
Hong Kong and Guangdong need to get in step to achieve future growth through integrated development
Anthony Cheung
22 December 2008
The fate of Hong-Kong-owned small and medium-sized enterprises in the Pearl River Delta region has exposed once again the vulnerability of many such businesses. This is especially so in the face of Guangdong’s recent attempts to upgrade its industrial structure, partly by pushing away low-value-added and heavily polluting industries. And it has been made worse by the latest credit crunch caused by the global financial tsunami.
The city’s local manufacturing sector has been steadily hollowed out since the mainland opened up three decades ago. Now, any talk of reindustrialisation cannot begin without taking into account the larger Pearl River Delta scene.
Guangdong also faces its own restructuring problems. Being one of the first beneficiaries of economic reform and opening up, by last year it had become the world’s 21st-largest economy. After 30 years of reform, its agricultural sector has shrunk from 29.8 per cent to 5.7 per cent while its tertiary and services sector now accounts for 42.3 per cent of its economy. Its urban population jumped from 17 per cent to 65 per cent of the total.
It is now much more externally dependent and has to maintain competitiveness in a more complicated, globalised environment. The main challenge is how to move to the next stage of industrial upgrading, and to a post-industrial and knowledge-based economy.
Meanwhile, Shanghai and the Yangtze River Delta region have caught up fast, displaying even more vibrant economic dynamism.
Guangdong has good reason to seek a new mode of reindustrialisation, but Hong Kong industries have reached a stage where they can no longer depend on the low production costs in the Pearl River Delta region. Hong Kong exploited the mainland’s economic and political turbulence, then its opening up, to benefit its own industrialisation, and then its industrial relocation as it advanced to become a financial and services hub. The next decades cannot be a replication of earlier phases. Growth and affluence can come about only through integrated development, to achieve co-prosperity.
As both Hong Kong and Guangdong move up the industrial ladder, they may both benefit from regional collaboration and complementary growth. They probably also need a regional solution to provide jobs for low-skilled workers. Environmental protection and transport infrastructure are other areas calling for an integrated strategy.
Most people recognise the growing interdependence of the two economies. At the government level, both sides seem willing to strengthen collaboration. It is no secret that, under the new leadership of Guangdong party chief Wang Yang , provincial officials and think-tanks are keen to factor Hong Kong into its grand plan for grooming a greater Pearl River Delta world-class metropolis. In Hong Kong, the Bauhinia Foundation Research Centre published a report in October urging the acceleration of economic integration, using the same language and logic as Guangdong.
However, the long-standing emphasis on separation between the “two systems” has sometimes prevented the consolidation of a much-needed new regional outlook. Three major problems remain.
First, much of the enthusiastic talk about integration is still rhetoric, not really backed up by concrete, workable measures. The sense of mutual benefit has yet to take root, as illustrated by Guangdong’s unilateral industrial upgrading measures without full regard to the reaction of Hong Kong’s small and medium-sized enterprises, which have also shown little sympathy for the economic needs of the province.
Second, unlike the European Union, where, despite national boundaries, there exists a high degree of institutional affinity and shared social values, Hong Kong and Guangdong do not necessarily share a common identity.
Third, both differ greatly in their developmental thinking, strategies and policymaking mechanisms.
Guangdong essentially adopts a state-led development approach while Hong Kong is still deciding between non-interventionism and some degree of government action. Whereas mainland governments could push things ahead rather quickly, Hong Kong has a structurally weak government.
Clearly, one cannot assume that the two sides will be able to tango in perfect unison.
Anthony Cheung Bing-leung is an executive councillor and a founder of SynergyNet, a policy think-tank
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