I am delighted to speak at this forum on the Greater Bay Area (GBA). As an economist I know that what is important is to focus on the fundamentals so that is what I am going to deal with.
It might seem strange, but in economics it is easier to predict what will happen in the next five years than to the predict what will happen in the next six months. But this is only superficially a paradox - because economic development is determined by fundamentals whereas comparatively minor issues can affect the short term. Economic fundamentals determine that if in the short term some factor or other causes an economy to develop more slowly or faster than its underlying development then in a future short-term period the opposite divergence will take place. Therefore, I want to step back and look at the fundamentals of the GBA and only make some passing remarks on temporary local issues.
The global significance of the GBA
The fundamental fact of the GBA is that it is one of the two biggest and most technologically advanced locomotives of growth and development in the world economy today. This is determined by the following key facts.
First, the size of the GBA – with its biggest economic centres being in Guangzhou, Shenzhen and Hong Kong. Only 12 countries in the world are larger than the GBA in terms of GDP. To be precise, only the G7 and BRIC economies, plus South Korea, are larger in GDP than the GBA.
But even this does not capture the real global significance of the GBA - because economic growth in the GBA is much more rapid and dynamic than in either the G7 or BRIC. With a GDP growth of around 6% a year, in the Mainland China part of the GBA, only India among other major economies begins to approach the GBA’s rate of growth. Even California does not match the GBA in this.
What also determines the global significance of these areas is their technological level. California is, of course, the most advanced technological state of the US. But in some key areas China, with the centre of this development in the GBA, has already overtaken the US.
E-payments are far more advanced in China than the US – I feel very old fashioned because in China I use cash and credit cards! When I was in a bank in Beijing my colleague said – ‘see only old people and foreigners are here, no one else in China uses cash!’ If I could make one appeal to Alipay and WeChat could you make it a bit easier for foreigners to register to use your systems!
I use the messaging system WeChat all the time – I can tell you it is much better than its equivalent WhatsApp which I have to use in the West.
I also use Weibo all the time – it is much better than it Western equivalent Twitter.
Take also the high-speed train system in China, to which Hong Kong is becoming connected and which connects the GBA with the rest of China. It is far superior to anything not only in the US but in my own country or Europe. It is, in addition to its convenience, also far superior environmentally than the old-fashioned method of flying over medium or short distances which the US and most of Europe still uses. For example, in Europe it can take a day to travel by train over a distance which in China would take only a few hours, while in the US railroads are not effective at all in large parts of the country.
There should not be even slight exaggeration – that is very dangerous in serious matters. I perfectly understand that the overall technological level of China’s economy, even in the GBA, has not yet reached the level of the US - even if China’s and the GBA’s pace of development is now much more rapid even than California. But these examples show what is occurring. As China’s overall average level catches up with that of the US this is naturally not a uniform process. China is inevitably actually in advance of the US in some areas. Because I work at Chongyang Institute for Financial Studies, Renmin University of China I therefore have to regularly interact with both China’s and the Western economies I understand these realities very clearly.
Temporary local difficulties in Hong Kong
Fundamentals allow any present temporary problems to be placed clearly in context. People who are today attempting to disrupt Hong Kong, to challenge its one country two systems position, have no chance of success whatever. It can be explained simply in a way a Western audience can understand clearly.
Abraham Lincoln is generally considered the greatest president in the history of the United States. When Lincoln was faced with secession by the US southern states he unleashed the full force of the US armed forces to crush it – empowering his most determined generals, Grant and Sherman, to utilising devastating means which invented the modern concept of ‘total war’. Lincoln unleashed that war because he made clear under no circumstances whatever would secession from the United States be accepted.
Present problems in Hong Kong, fortunately, do not require even slightly the methods which Lincoln was prepared to use. But his example makes clear why secession from China will never be accepted, and has no chance of success - in the same way that Lincoln made clear secession from the United States would never be accepted or succeed.
All that the people creating violence in Hong Kong today are doing is damaging Hong Kong, and the livelihood of Hong Kong residents, in an attempt which therefore has zero chance of success. Unfortunately, the people who are leading this, who are organised from abroad, may succeed in involving innocent people in this.
But because this activity has zero chance of success it will die away – I am not going to guess whether in a few days or a few months. And that will leave the fundamentals of Hong Kong unchanged.
Hong Kong’s future with China
Hong Kong is not going to be towed away from China! it is permanently part of China. And that is its great advantage. The one country two systems under which Hong Kong operates gives it great advantages. On the one hand it is linked to and part of China's economy - the 2nd largest in the world at current exchange rates and already the largest in the world measured in Purchasing Power Parities (PPPs). If that fact did not exist Hong Kong would not have anything like its significance in the world economy. But at the same time, due to the ‘two systems’, Hong Kong's economy is very open to the rest of the world economy. Gaining the maximum from these twin advantages is what Hong Kong’s future and prosperity rests on.
Indeed, Hong Kong has the opportunity to gain from other recent events - In particular the recent turn to protectionism by the Trump administration United States. If I may express a personal opinion I believe that Chinese companies made a mistake making their main listing on the New York Stock Exchange. No other major country has its most strategic companies listed outside its own territory because these companies should not be subject to pressure from other states. I believe that over the coming years that mistake will be rectified, and Chinese companies will relist on Chinese stock exchanges. Obviously, Hong Kong is one of, indeed probably the, obvious place for this.
In summary the economic fundamentals determine that Hong Kong's future lies entirely with China, and more specifically the GBA – which, as I started with, is why the GBA, together with California is one of the two most advanced growth engines of the world economy.