14th Five-Year Plan creates opportunities for GBA in China's new development pattern

Release date: 13 September 2021

Deloitte today releases Driving new development of the Greater Bay Area in the 14th Five-Year Plan period, a white paper analyzing the role of the Greater Bay Area (GBA) in China's new development pattern and recommending areas of strategic focus during the 14th Five-Year Plan period. 

The new development philosophy of innovative, open, green, coordinated, and shared development is set to shape the GBA in four key areas of focus over the coming years: creating an international innovation hub, becoming the national benchmark for green transformation, exploring a new model of coordinated supply chain development, and developing a national high-level platform for opening up. 

To capture these opportunities and support GBA development, Deloitte also announces today that it is expanding its footprint in the GBA with three new strategic initiatives: Deloitte GBA Center of Excellence, Deloitte Intelligence Center, and Deloitte Cyber Intelligence Center. 

A follow up to Deloitte's 2018 report, From "world factory" to "world-class bay area" – Proposals for the development of the Guangdong-Hong Kong-Macao Greater Bay Area, today's white paper proposes a range of directional recommendations for further development of the GBA through cross-regional, cross-sectoral resources. It details the progress in GBA development over the past four years, including the formation of the "one-hour living circle" and transformation of major collaborative platforms, including Qianhai and Hengqin, into carriers of innovation. The GBA continues to harmonize the systems, customs arrangements, and laws of the region's three economies, while driving market development through financial innovation and connectivity.

"Looking at the 14th Five-Year Plan period, the GBA is poised to take on an increasingly important role in the wake of COVID-19's global impact within an evolving domestic and international landscape," says Deloitte China Southern Region Managing Partner Edward Au. "The GBA is a platform for national strategic advances in science and technology, and a driver of high-quality development. It is also pivotal to coordinated regional development and the integration of Guangdong, Hong Kong, and Macao in national development."       

"Twin innovation corridors and zones" the internal impetus for independent innovation

The GBA hosts numerous leading tech companies and a highly integrated scientific research sector, backed by abundant talent and development space for scientific and technological innovation. However, there is a need to enhance the cluster's international influence, industry synergies, and enterprises' innovative capability. The GBA's rate of regional patent cooperation is 0.95%, far lower than those of the other three leading international bay areas. Meanwhile, the competitive landscape, particularly tech competition between China and the US, is intensifying, forcing the GBA to form internal drivers of independent innovation. 

"Combining the openness of Hong Kong and Macao's markets with the Pearl River Delta's industrial innovations is essential to building the GBA as an international innovation hub," says Deloitte China Southern Region Mainland Managing Partner Tom Kwok. "The establishment of an innovative ecosystem surrounding the 'twin innovation corridors and zones'¹   can enhance the coordinated development of city clusters and industries. The convergence of research capabilities, innovative industries, and capital will boost investment diversification, internationalization and market-based operations. The GBA can also link the scientific and technological advantages of Guangdong, Hong Kong, and Macao by absorbing international resources to enhance the GBA's international influence."

Green transformation empowered by finance, industries, and cultural ecology

Hong Kong’s carbon emissions peaked in 2014, and Guangdong is a leading low-carbon province in China, representing 38% of the country's carbon emission trading pilots – more than any other province. The GBA can be a leading region in China's green transformation. However, it does not yet have systemic objectives or coordinated governance mechanisms, and faces challenges including relatively underdeveloped green infrastructure and ecological standards compared with other world-class bay areas, insufficient green technology advancement and innovation resources.

With green transformation requiring public-private partnership, Deloitte recommends that the governments of the region's three economies establish a coordinated governance mechanism and common green taxonomy and framework, while investing in cultural ecology pilot zones. Local governments can also take the lead in setting up guidance funds or green funds focused on promoting green finance in the GBA. Businesses, meanwhile, can embark on their transition to carbon-zero through digitization and create practical examples for the market. They should also enhance carbon footprint management and meet external regulatory requirements in areas like ESG.

Focus on new model of coordinated supply chain development 

The GBA has strong manufacturing foundations, drawing together 80% of China's supply chain businesses. The region's strong capabilities in scientific research and its commercial application, plus Hong Kong’s status as an international financial center, give the GBA more complete advantages compared to the other three major international bay areas.     

However, there are several obstacles to logistics development in the GBA, including different regional administrative systems, the movement of production capacity and a lack of coordination, and insufficient development of digital platforms. Deloitte recommends that policies in the GBA be integrated to strengthen coordination and links between logistics operators in different cities and deeper cooperation across industrial chains. Digital transformation, AI, and modern communication technologies can also empower smart logistics platforms and update traditional logistics industry chains.

Building a high-level platform for opening up the financial market

The increasing number of international financial institutions looking to establish or expand businesses in the GBA highlights the need for improved connectivity and deeper financial cooperation among the Chinese Mainland, Hong Kong SAR, and Macao SAR. The recently announced Hengqin Plan and Qianhai Plan also include measures for advancing the reform and opening up of the financial market. Hengqin will introduce innovative cross-border financial management schemes, with the "line management" model set to expand Macao's free port space while promoting economic diversification in the SAR. On the other hand, Qianhai will further its role as a demonstration area for opening up of China's financial industry and a pilot zone of cross-border RMB business innovation. The Regional Comprehensive Economic Partnership (RCEP) signed in November 2020 will also foster a more open and competitive market environment in the GBA.

Deloitte suggests that GBA financial cooperation be deepened, and technologies leveraged to enhance regulatory coordination and connectivity. It also recommends that the region leverage key collaborative platforms for innovation, while establishing task forces to further coordinate and align policy standards across the three economies that give full play to the extended benefits of the free port regime. The white paper also suggests approaches to overseas presences be made more flexible in combination with RCEP rules, including those on cumulation of origin, and the development of a digital trade platform based on the GBA's advantages in cross-border e-commerce. 

"Each of the four directions has its own focus, but there are commonalities too," adds Kwok. "Coordinated GBA development is a top priority that requires not only hardware connectivity, but also improved soft connectivity of different systems, customs, and jurisdictions. Be it bridging the economic gap between cities, boosting the flow of innovation factors, setting up cross-regional governance, or the integration of logistics policies, coordination must always be emphasized."   

Three new strategic initiatives to expand Deloitte's footprint in the GBA

As part of its efforts to support and contribute to the GBA's further development, Deloitte has initiated three new strategic initiatives for the region, including Deloitte GBA Center of Excellence, Deloitte Intelligence Center, and Deloitte Cyber Intelligence Center. 

The Deloitte GBA Center of Excellence as a think tank will continuously focus on policy research and recommendations, help businesses grasp opportunities arising from the GBA as well as encourage talent mobility in the GBA.

The Deloitte Intelligence Center specializes in market research and data analysis, providing a range of big data consulting services, from strategic planning to implementation, in line with concepts of innovation emphasized in the 14th Five-Year Plan.

The Deloitte Cyber Intelligence Center's security analysis, monitoring and incident response services enable enterprises to address cyber threats, build solid business foundations, and grasp opportunities arising from the GBA's rapid development.

"With strong economic vitality, a high degree of inclusiveness and openness, and leading innovation capabilities, the GBA has all the foundations of a world-class bay area," Au concludes. "In the 14th Five-Year Plan period, and under China's new 'dual circulation' strategy, Deloitte looks forward to the GBA's future development, and will continue to work with all stakeholders to deepen the cooperation of Guangdong, Hong Kong, and Macao, and advance GBA development."

Click here for the full report (available in Chinese only).

_{[1] The 'twin innovation corridors' refers to the Guangdong-Shenzhen-Hong Kong and Guangdong-Zhuhai-Macao Innovative Technology Corridors; the 'twin innovation zones' are the Shenzhen/Hong Kong Innovation and Technology Cooperation Zone and Guangdong-Macao In-depth Cooperation Zone in Hengqin.}