Digital makeover for China’s gateway

Hong Kong, traditionally a gateway bringing goods and people to and from Mainland China, is receiving a 21^st-century makeover, transforming itself into a portal for data, finance, talents and services – as well as goods.And nothing highlights this makeover more clearly than the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) project. This scheme unites the two special administrative regions with nine adjacent metropoles in Guangdong province – Zhaoqing, Jiangmen, Zhongshan, Zhuhai, Guangzhou, Dongguan, Shenzhen and Huizhou.This integration comes as enterprises in Guangdong seek to move up the value chain in the face of rising labour cost, a fiercely competitive global marketplace and increasingly demanding customers, whose needs frequently change.A survey by the Hong Kong Trade Development Council’s Research division in the southern China region found that more than half of mainland enterprises intended to make greater efforts in developing mature and/or new markets overseas. Many also said they would further expand into the mainland domestic market, enhance their product design and technological research and development (R&D) capabilities, develop-strengthen own-brand business, as well as pursue transformation and upgrade by way of such business strategies as enhancing production technology/automation.Despite the rate of industrial growth in Guangdong dropping from double-digit figures of previous years to 7.2% in 2017, the industrial sector has grown steadily amid rising competitiveness. Average pre-tax profit margin of Guangdong’s manufacturing enterprises has risen steadily from about 8.4% in 2000 to around 10.3% in 2017, suggesting their efforts to transform and upgrade have been fairly successful.As production capacities rise, the labour productivity of Guangdong enterprises, as measured by the average industrial value-added per worker, rose rapidly from less than Rmb60,000 (US$8,874) per capita in 2000 to more than Rmb220,000 in 2017, an almost three-fold growth.  The installation of more automated production lines has also, to a certain degree, helped raise the contribution from capital input to pre-tax profit. Hong Kong is playing a critical role as Guangdong enterprises move up the value chain and adopt innovative technologies such as artificial intelligence (AI) and big data as the region seeks to become a world leader in innovation and technology. The city has an existing cluster comprising local and overseas players engaging in technological innovation activities. Industry players and services providers in Hong Kong can also meet the needs of enterprises in the region in developing their technology business. Hong Kong recently signed the Arrangement on Enhancing Innovation and Technology Cooperation between the Mainland and Hong Kong (the Arrangement) and the Agreement on Commencing Jointly Funded Projects between the Ministry of Science and Technology and the Innovation and Technology Bureau of Hong Kong Special Administrative Region (HKSAR) Government (the Agreement). The Arrangement and Agreement will serve as guides for Hong Kong as it implements various innovation and technology cooperation initiatives in the next few years.Developing innovation and technology industries is a key feature of the GBA project and Hong Kong’s strengths in finance and business services as well as its well-respected legal system and strong communications links with the rest of the world will play a key role in driving this forward.To boost the development of the technology sector, Guangdong has promulgated a Guangzhou-Shenzhen Technology and Innovation Corridor. The long-term goal is to complete the establishment of a technology and innovation corridor by 2050 that will have global influence, providing strong support to Guangdong’s position as one of the world’s leading innovative regions and fostering the development of the GBA as a leading global technology and innovation centre. The planned corridor begins in the north at the Guangzhou-Foshan border and ends in Shenzhen’s Dapeng New District in the south. Planning will focus on innovation clusters along key transport routes. The corridor is approximately 180 kilometres long.

Hong Kong is in a strong position to help foster technology industry development in the Greater Bay Area, especially in areas such as international cooperation. Guangdong enterprises are stepping up efforts to develop standard solutions for Internet of Things (IoT) applications, big-data analytics, new-generation communications (such as 5G) and AI and robotics, but some are limited in these areas by a lack of user experience. Hong Kong industry players are familiar with advanced-technology development overseas and are adept in leveraging standards and technology frameworks commonly used internationally. They can provide technology and management system applications and solutions, and help their GBA counterparts with the commercialisation of technology projects.Hong Kong’s legal system enjoys a good reputation and its compliance with international legal practices. Hong Kong industry players are known to treat intellectual property (IP) assets such as trade secrets and information on design and technology seriously and respectfully. As a technology trading platform, Hong Kong is trusted by overseas players in the technology sector and has already set up arrangements with the mainland regarding the mutual recognition and enforcement of judgments from arbitration and civil and commercial cases. Overseas companies can use Hong Kong’s judicial system to enforce arbitration awards or court judgments and to protect their IP in Hong Kong and the mainland. Hong Kong can also provide a wide array of professional services in IP management, maintenance and audit. As such, it can facilitate technology cooperation between the mainland and overseas technology companies.