Hong Kong and the mainland’s intertwined economies

Caixin Global has a series of charts taking a deeper look at how intertwined Hong Kong’s economy is with the mainland. They are well worth a look. Highlights:  


  • Hong Kong’s plateauing investment in mainland 

In the first seven months of 2019, $55.37 billion of inbound direct investment in the mainland came from Hong Kong (including investment via free ports such as the Cayman Islands, Mauritius and Barbados), accounting for 70.27% of the total.  

  • Most inbound investment to China comes via Hong Kong 

The value of direct investment from Hong Kong in the mainland in 2018 was $89.9 billion — excluding investment through free ports — which was way more than investment from anywhere else. 

  • Most outbound investment flows through Hong Kong 

In 2017, $91.2 billion of the mainland’s outbound direct investment flowed into Hong Kong, making it the most important destination for mainland capital. Britain’s Virgin Islands ranked second, attracting $19.3 billion. 

  • Most tourists to Hong Kong come from the mainland 

In the first half of 2019, 27.6 million mainland tourists visited Hong Kong, accounting for nearly 80% of tourists to the city. Last year the number of mainland tourists to Hong Kong exceeded 50 million, a record high. 

  • Fewer mainland migrants to Hong Kong 

In 2017, the number of mainland migrants to Hong Kong was about 47,000, down 10,400 from the previous year. 

GBA Briefs: 23/8/2019

Carmakers Skid: Guangzhou R&F Properties has halted its cooperation with Hawtai Motor, which appears to have run into cashflow problems. The two companies signed a venture agreement a month ago. Read more.

Energy Rising: Shenzhen Energy saw Q1 revenues jump 30.14% YoY to RMB10.386 billion, while profit was up 92% to RMB1.032 billion. Read more.

Talent Moves: More than 2,200 people have so far applied for the Greater Bay Area “talent card”, including 228 from Hong Kong and Macau. Cardholders can enjoy local access to schooling, social security, medical services, financial services and more. Read more.

Qianhai’s office rent seen catching up fast

Qianhai has a lot of yet-to-be leased office space on the market, with vacancy rates at historic highs for a district in Shenzhen. Never mind, says international real estate consultancy Colliers, it will catch up fast and likely overtake the neighboring Houhai district.  

Thanks to policy support for the special economic zone, which is attracting a surge of investment, Colliers believes Qianhai will benefit from near-term and longer-term trends in the coming years. (Read our primer on Qianhai to understand more.) Subsidies are currently generous, making rents here less than 70% of what they are in other districts, while infrastructure is being put in place that will soon make the district easier to access from the rest of the city.   Continue reading Qianhai’s office rent seen catching up fast

Shenzhen throws cash at big brains

Shenzhen has been raising the bar in the region’s “talent wars”, with competition growing steadily among the 11 GBA cities. Subsidies in the form of housing and tax-equalisation measures have been getting rolled out aggressively lately. The city’s academic leadership must be feeling the pressure, however, because now Shenzhen has set its sights on a few people at the very top of the academic food chain, offering eye-watering incentives to retain its brightest minds.  

According to the city government’s announcement, 10 “training objects” with the potential to grow into the city’s “Class A talents” will be granted “training funds” of either RMB10 million, RMB15 million, or even RMB20 million, spread over a five-year period.

Although the awards will be given regardless of nationality or household registration status, there is a catch. They are for people already working full-time in Shenzhen, and should meet one of the following conditions: 

  • Previously presided over major national scientific research tasks; 
  • Experience leading national-level innovation bases or key discipline projects;
  • Experience leading a high-level innovation team at or above the provincial level;
  • Responsible for major breakthroughs in forward-looking basic research and original innovation; 
  • Contributed to leading-edge technologies, modern engineering technologies, and disruptive technologies.

The selection committee will focus on basic and applied research, especially in Shenzhen’s current and future areas of competitive advantage. 

According to the guidelines, 50% of the “training funds” will be allocated upon signing with the balance paid after a mid-term evaluation. Needless to say, contracts will be designed to lock these bright minds into their employer for the full five years, during which time they will not be allowed to take outside work in the private sector.

The incentives will be launched on September 1, and will be granted every two years. 

Beijing asks Manila to ban all online gaming

The central government clearly is not going to let up on Macau’s junkets. While the Greater Bay Area plan is pushing more mass-market tourists through Macau, Beijing is pursuing the offshore online-gaming operations run by groups widely believed to be tied to junket operators – although most deny any links to the activity. 

Cambodia recently announced it would crack down. The Philippines also said it would stop taking new applications. But that is apparently not enough for the Ministry of Public Security, which sees the online-gaming operations – and their associated money-laundering networks – as threats to national security. Now, the central government’s Ministry of Foreign Affairs has called on Manila to ban the operations outright.

As reported by GGRAsia: “POGOs [online operators] are said to have been expanding aggressively in the Philippines, with currently 58 licensed such operators in the country, and three others awaiting licences. Many of these operations specifically target Chinese customers.”

Timing is obviously an issue. The President of the Philippines, Rodrigo Duterte, and Chinese President Xi Jinping are poised to discuss the issue during a meeting later this month.

The news comes just as official data shows Macau’s tourism industry to be in good health, with visitor numbers up 16.3% YoY in July to 3.53 million. Mainland tourists were up 18.5%, with most growth coming from the nine GBA cities inside Guangdong (+27.5%).

However, data also showed that non-gaming spend by visitors is declining. In Q2, they spent MOP15.71 billion, excluding gaming expenses, down 4.8% year-on-year. Shopping remained the largest single-category, at 44.8% of total outlay. 

Read more on GGRAsia.

Macau’s new chief has a plan: don’t mess up

Farah Master pays more attention to Macau than any other Hong Kong-based journalist, SCMP included, and so we were pleased to see today that she has a thoughtful piece out on the “other SAR”. 

The timing is great. Hands up any reader that knew Macau was anointing a new Chief Executive this weekend? Didn’t think so.

Ho appears to be stepping into the job with gusto. Although initially reluctant to take a high-profile approach to his “campaign,” he has recently been a daily fixture on the front page of Macau Daily, constantly visiting local communities, pressing the flesh with leaders of grassroots associations and their rank-and-file alike. He has been able to do this, unlike his counterpart in Hong Kong, because he need not fear being petrol-bombed in public. Macau is a relative oasis of calm, even though it is a short hop across the bridge from the tinderbox of Hong Kong.

It’s not really fair to compare the two, however. If Carrie Lam had only Wan Chai to govern, her job would be a lot easier, too. Macau has less than a tenth of Hong Kong’s population. Nevertheless, it is inarguable that the people of Macau have seen the quality of their lives appreciate immeasurably since the Portuguese dumped it back on Beijing’s hands in 1999. There is little wonder they haven’t had the same fiery response as their Hong Kong counterparts to anything from the central government that might seem pushy, like the extradition bill.

For this, the casinos deserve some thanks. No, seriously. These companies, dominated by foreign investors, have been pillars of the community, even though they have been responsible for bankrupting more than one gambler – mostly from across the border – over the nearly 20-year run of their current concessions. 

List the ways, you say? Well, for a start, unlike business leaders of similar economic clout in Hong Kong, Macau’s casinos haven’t had the chutzpah to try to do a run-around on the local government. (Not more than once, at least.) They pay well. They provide career training. They arrange visits to elderly homes. They make ambitious, world-class art festivals happen at the drop of a hat. They bring mandopop king Jay Chou to perform there. Need we say more?

There are some things the casinos can’t do, of course. They can’t build world-class healthcare facilities, and they can’t get the trains to run on time, because those are jobs reserved for the people to whom the casinos pay 40% of their revenues in taxes. But pretty much everything else good about Macau’s development since 1999 is theirs to take much credit for. Edmund Ho was a genius for bringing them in within a couple of years after he became Macau’s first CE. One can only imagine what Hong Kong would be like today if its first CE had possessed the vision and courage to break up its property oligopoly in 1997.

Since 2009, Macau has had some challenges, to be sure. But that looks likely to change. Ho Iat Seng seems determined to address the perception that the executive branch has been less active over the past decade. He has already put forward all sorts of ideas for building better infrastructure and improving people’s livelihoods. He sounds like a go-getter. And he looks like one, too.

His Hong Kong counterpart had said she wanted to do the same thing back when she was campaigning for the job. She had talked about focusing on bread-and-butter stuff and putting aside the contentious issues that had seen her predecessor leave office after one term. Perhaps now she will have the opportunity to really do so. Ho is fortunate that he won’t be coming to the job under anything like the same pressure that she stepped into. And it could be said that he is fortunate to be able to see, thanks to her, what troubles lie ahead if he fails to deliver on his campaign pledges. 

Nevertheless, there is a sense in Macau that its best days are still ahead of it, and that the city is getting the leader it deserves.  Put this together with the gift of the Greater Bay Area masterplan, and we, too, see a long, clear runway ahead for the other SAR to enjoy a spectacular takeoff in the coming decade.

Nansha’s Mingzhu Bay gets eco-tourism focus

Guangzhou’s Nansha district government has released a plan for the subdistrict of Hengli, specifically related to its Mingzhu Bay area. Under the plan, Mingzhu Bay will be developed into an eco-tourism demonstration zone.

Hengli itself is being built as a World Financial Island (read our primer here.) But a key part of the plan is to attract international financial companies and talent, which is why Hengli also has a big area along its waterfront designed for lifestyle attractions. Therefore, with its abundance of high-quality ecological resources and a quaint rural culture, Mingzhu Bay is seen as an ideal spot to foster a new kind of tourism in the region – one that is low-impact, low-density and high value-added. 

GBA Briefs: 21/8/2019

Japan Gets It: Japan’s leading telecom operator, NTT Docomo, will resume taking orders of Huawei P30 Pro smartphones from today, breaking the stalemate since May after the US government blacklisted Huawei. Read more.

Chery and ZTE: Telecoms equipment giant ZTE and Chery Automobile, China’s largest passenger car exporter, have agreed to develop application scenarios of 5G in vehicles, intelligent manufacturing, and smart parks. Read more.

Hotline: Guangzhou has launched a hotline (12355) to give legal advice and counseling services for Hong Kong and Macao youths living in the city regarding study, career, entrepreneurship, volunteer services, cultural exchanges. Read more. 

Midea Surges: Foshan-based electronic appliance giant Midea recorded sales of RMB47.2 billion in the first half, up 17% year on year, completing 47.2% of its RMB100 billion annual revenue target. Read more.   

Research Grant: Hong Kong University of Science and Technology has won HK$45 million in research funds from Guangdong in the first cross-border grants for scientific collaboration within the Greater Bay Area. Read more. 

Walmart to add 100 Guangdong stores

Walmart intends to add another 100 stores in Guangdong over the next five years, according to a company statement. They will include Sam’s Clubs, shopping malls and shops in residential communities, said the Arkansas-based retail giant, adding that it will also set up cloud-based warehouses for the branches.

Walmart opened its first China store in Shenzhen in 1996, and now has over 400 across the country. In March it completed its largest investment in China to date – a distribution center for fresh foods in Dongguan costing more than RMB700 million, serving over 100 brick-and-mortar shops.

Its newest store format, outlets in residential communities, debuted in Guangdong last year. It also set up a WeChat mini program for home deliveries this year, offering service to doorsteps within an hour of placing an order.

Cross-border e-commerce surges

Guangdong may be weathering a difficult external trade environment, yet growth in one key segment is exploding: cross-border e-commerce. In the first half of this year, imports and exports ordered and shipped via the internet grew 76.8% to RMB43.02 billion. Nearly all went through special bonded zones in Guangzhou, Shenzhen, Zhuhai and Dongguan, where 3,000 enterprises have clustered to take advantage of easier tax and other regulations.

Admittedly, this is still a small drop in the bucket. The province’s overall trade was worth RMB 3.28 trillion in the first six months, up 1.3% year-on-year, accounting for 22.4% of China’s total imports and exports. More than half was accounted for by private enterprises, which saw their trade numbers grow 5.9%, up 2.2 percentage points YoY.