It has only been five years since the concept of the Guangdong-Hong Kong-Macau Greater Bay Area (GBA) was brought up in China's 13th Five-Year Plan, but most major banks and financial institutions (FIs) already have a strategy in place and are bulking up their operations in the area.
Standard Chartered, for example, aims to triple its income from the GBA over the next five years with the support of 2,500 staff and is looking to set up a Greater Bay Area Centre in Guangzhou. The Bank last year became the first major bank to announce the creation of a chief executive role for the GBA. HSBC and Bank of East Asia have also appointed new heads to take charge of the area.
As China opens up its financial markets further with supportive regulatory momentum and heightened interest in wealth management, we expect to see more aggressive plans from regional and international banks to expand in the region. Where must Banks primarily focus to win the race?
What Is the Greater Bay Area (GBA)?
The GBA is an ambitious plan to create an integrated economic and business hub, linking Hong Kong and Macau with nine cities in Guangdong including Guangzhou, Shenzhen, Zhuhai, Foshan, Zhongshan, Dongguan, Huizhou, Jiangmen and Zhaoqing. With a population of about 71 million producing 12 percent of China’s gross domestic product (GDP), the growth potential of GBA appears bright.
But where do the specific pockets of growth lie within business banking, investment banking and wealth management?
Greater Bay Area (GBA) At A Glance
• Population: 70.8 million (5% of mainland China's total)
• Regional GDP: USD 1,655 billion (12% of mainland China’s total)
• Area: 56,394 km2
Note: Data as at the end of 2019
Source: Straits Times Graphics; SCMP; China National Bureau of Statistics
Corporate/ Institutional Banking: Opportunities in Cross-Border Trade and Supply Chain
Based on recent conversations with the Top 1,000 corporates in Asia, East & Partners have found that close to two in five (38 percent) are planning to enhance their cross-border trade through the GBA in the coming five years, using the area as a gateway between the Mainland China market and wider Asia to grow their revenue base.
At the same time, a similar proportion (37 percent) of corporates are also looking to shift a part of their supply chain to the region, drawing upon the strong manufacturing base spread across multiple GBA cities and more specifically the high-tech manufacturing centre in Shenzhen.
While providing trade and supply chain financing as well as management to connect businesses in the region with international markets has been Hong Kong’s core competitive advantage, future demand is likely to focus on having seamless onboarding, account management and payments experiences, among other things, across the various jurisdictions within GBA.
Other key areas of focus for these top-end-of-town corporates include setting up R&D facilities/ technological innovation facilities (21 percent), exploring green financing (11 percent), and to a lesser extent, setting up a regional treasury centre in GBA (4 percent).
"We saw good momentum on that last year, especially
with our supply-chain solutions. We're going to
double down on that in the Greater Bay Area"
- Piyush Gupta, DBS Group CEO
Investment Banking: Raising Equity Capitals Should Be on FIs’ Radar
Asian corporates are also eyeing the attractive capital pool in the GBA which comprises both institutional investors and retail investors. About one in four (25 percent) corporates are seeking to raise equity capital in the area over the next five years, ahead of debt capital (19 percent). This is important to both Mainland China companies and foreign companies.
Strategic Plans of the Top 1,000 Corporates in Asia for the GBA in the Next 5 Years
% of businesses
Source: East & Partners Asian Transaction Banking Markets insights analysis – H1 2021
That said, a sizeable proportion (54 percent) of large corporates in Asia still do not have a concrete plan for the GBA. Is it because they do not see the area as essential to their company’s strategy? Or they lack sufficient information to assess the full potential of the GBA?
As for their counterparts who have already put into place some strategic plans for the GBA, how can FIs help these businesses finetune their blueprint further?
Opportunities in Wealth Management: Early Adopters and Market Education
Despite not having a launch date for Wealth Management Connect and with China still fleshing out the plan with more details, high-net-worth individuals (HNWIs) in the GBA, especially those in Mainland China are bullish on the scheme.
We are expecting a sizeable number of early adopters. This is illustrated by the fact that close to six in ten (58 percent) HNWIs in Mainland China are interested in investing in products distributed by banks in Hong Kong and Macau, while half (48 percent) of the HNWIs in Hong Kong are planning to take advantage of the scheme to invest in wealth management products and mutual funds offered by banks in Mainland China.
Moreover, there is a significant opportunity for market education, in particular covering the Northbound leg of Wealth Management Connect. About half (49 percent) of Hong Kong’s wealthy are not familiar with the scheme, along with 38 percent of Mainland based HNWIs. It is a good time for banks to demonstrate their GBA expertise, carefully differentiating their products and services and tailoring them to the needs of GBA customers.
How can FIs design a successful Thought Leadership programme to actively shape conversation around leveraging Wealth Management Connect?
"GBA, the wealthiest urban cluster in China, is one
of the world's largest banking clusters with expected
banking revenues to reach US$185 billion by 2025"
- Greg Hingston, HSBC Asia Pacific Head of Wealth and Personal Banking
Promising Demand To Leverage Wealth Management Connect Scheme
% of high-net-worth individuals (HNWIs)
Source: East & Partners Asian High-Net-Worth Individual insights analysis – H1 2021