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China’s central bank and other regulatory bodies have drawn up a new cross-border trade and investment plan for the Greater Bay Area (GBA), the Chinese government’s scheme to link the semi-autonomous states of Hong Kong and Macao with nine cities in southern China and create one of the world’s largest economic regions.

In the plan, published on May 14, the People’s Bank of China (PBOC), China Banking and Insurance Regulatory Commission, China Securities Regulatory Commission and the State Administration of Foreign Exchange put forward guidelines to make GBA a financial powerhouse.

The guidelines include measures to promote cross-border trade, boost innovation in the financial sector, mitigate cross-border financial risks and facilitate overseas investment and project financing.

They build on the wider GBA plan proposed by China’s cabinet in February 2019 to connect former European colonies Hong Kong and Macao – handed back to China by the UK and Portugal, respectively, in the late 1990s – with nine cities, Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen and Zhaoqing, in China.

The plan comes amid ongoing political tensions between Hong Kong and China. Since mid-2019, Hong Kong has engaged in a raft of violent political protests driven by residents’ fears that they are losing their autonomy and that China’s influence over the territory is growing.

Yongmei Cai, Beijing-based partner at law firm Simmons & Simmons, tells GTR that the clash of different legal and political systems “will make unified treatment within GBA a great challenge”. She also points out that different rates of development in cities within the GBA could pose a problem in maintaining unity.

 

Endorsing trade

The new financial plan for the GBA calls for cross-border investment and trade finance to be promoted, together with the steady encouragement of the renminbi (Rmb) as a global currency, which the Chinese authorities say is “vital” for securing overseas deals.

It also says that trade and investment facilitation pilots should be explored and implemented, and that banks operating in the GBA region should make it more “convenient” for companies to “facilitate cross-border Rmb when handling trade revenue and expenditure business”.

As a means of enhancing innovation in the financial sector, the Chinese authorities say that the GBA should utilise emerging technologies such as blockchain, big data and artificial intelligence. It references GBA’s trade finance blockchain platform, explaining that it will enable parties to “share and exchange relevant digital cross-border trade information in a safe and reliable manner”.

While little is known about the platform, known as the Bay Area Trade Finance Blockchain Platform (BATFB) and led by the PBOC’s digital currency research lab, it is reportedly being developed to provide smaller businesses with easier access to trade finance in the Guangdong, Hong Kong and Macao areas.

Earlier this year, the Chinese government allocated Rmb32.4mn (US$4.7mn) in “special funding” to the PBOC to further develop the solution.

 

BRI boost

The new guidelines also call for lenders, businesses and individuals operating in the Greater Bay Area to support the Belt and Road Initiative (BRI) where possible.

The BRI is a plan by the Chinese government that aims to connect China with Europe, the Middle East, Africa and Asia through maritime networks and land corridors. Launched in 2013 by the Chinese President Xi Jinping, the initiative has seen billions of dollars ploughed into countries for infrastructure projects.

Chinese authorities want the GBA to support investment and financial services to enable Chinese enterprises to seek investment and secure mergers and acquisitions to help BRI construction efforts.

This follows on from their wider outline published in 2019, in which regulators first encouraged the GBA to adopt the “Belt and Road Initiative as an important focal point”.

A recent report by KPMG China, HSBC and the Hong Kong General Chamber of Commerce (HKGCC) notes that the GBA will increasingly act as a “springboard” for mainland companies expanding internationally, including into the countries and regions involved in China’s BRI.