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Innovation and business in the Greater Bay Area in China

by: Xinting Shao, SPI

 

This document is for: 

  • European SMEs and start-ups who provide innovative methods or ideas in specific sectors targeted by the GBA Initiative, such as advanced manufacturing, emerging high-tech industries and modern services. 

  • European SMEs and start-ups with technologically advanced features e.g., advanced materials, Artificial Intelligence (AI), ICT, Fintech, etc. who would like to enter the Chinese market 

Overview

The Greater Bay Area (GBA) refers to the Guangdong-Hong Kong-Macao Greater Bay Area in China which integrates the two Special Administrative Regions of Hong Kong and Macao, together with the nine municipalities across the Pearl River Delta, namely Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen and Zhaoqing in Guangdong Province. With a total area of merely 56,000 km2, it covers the country’s most open and economically vibrant region. It is home to over 72 million people, produces 37% of the country’s exports and 12% of its Gross Domestic Product (GDP). At the end of 2019, the combined GDP reached USD 1,679.5 billion, with a GDP per capita of USD 23,371. 

The Guangdong-Hong Kong-Macao Greater Bay Area is a key national economic development strategy for China. The concept for the area emerged in 2015, as part of China’s Belt and Road Initiative, and then it was isolated as a distinct project and included in the country’s 13th Five-Year Plan (2016-2020). Later in July 2017, a framework agreement on the development of the bay area was signed in Hong Kong. In February 2019, the central government released a more specific Outline Development Plan for the Guangdong-Hong Kong-Macau Greater Bay Area (hereinafter referred to as the GBA Plan) and announced the formal launch of the Greater Bay Area (GBA) Initiative, which intends to create a world-class urban cluster and a globally competitive high-tech economy by developing technology and innovation, boosting infrastructure and increasing financial links between the cities. 

Under the GBA Initiative, the Pearl River Delta Region is expected to transition into a financial and innovation hub of global significance. In order to facilitate the transition, the Chinese government plans to introduce a comprehensive set of new policies in key areas of R&D, immigration, inbound foreign investment management, cross-boundary financial integration, and IP protection. These policies are believed to not only foster economic and technological development of the region, but also generate broad business opportunities in the technology and financial services sectors for international business and investors. 

According to the GBA Plan, a regional R&D platform, known as the “Guangzhou-Shenzhen-Hong Kong-Macau” innovation and technology corridor, will be established to foster a supportive environment for innovation and entrepreneurship growth. For developing this platform, China seeks to attract foreign talent and expertise by launching a skilled immigration pilot program to create a convenient and regular pathway for foreign individuals to settle in the GBA and introducing tax-equalization policies to ensure overseas talent working in Mainland cities within the GBA will pay the same tax as they would for equivalent positions in Hong Kong and Macau. In addition, the GBA Initiative reaffirms China’s willingness to open up for foreign investment and encourages investment from foreign companies specialized in advanced manufacturing (e.g., automotive), emerging high-tech industries (e.g., 5G and Artificial Intelligence industries) and modern services (e.g., fintech).  

On Level 2 you can find information about innovation and business development in the GBA, while Level 3 will tell you more about business activities (through case studies) and what the EU has contributed in this region. 

 

This page will offer a brief overview of innovation and business development in the GBA. The main focus will be given on the roles of Guangdong province in spurring the development 

Innovation in Guangdong

Guangdong province, the mainland part of the GBA, has become the leading technology industry in the country after years of industrial transformation and investment. In 2018, the province’s R&D expenditure reached CNY 270.5 billion (USD38.6 billion) in 2018, accounting for 13.7% of the total national R&D expenditure and 2.78% of local GDP; there were nearly 25,500 R&D institutions in this region, including around 21,700 institutions in industrial enterprises; the total number of invention patents granted exceeded 53,000, with an estimated value of CNY 24 billion. The high-tech industry in Guangdong covers a wide range of areas, which comprise a new generation of 5G communication technology, biomedicine, new energy, new materials and environmental protection industries.  

The Guangdong government has stepped up efforts to improve basic research capability by establishing large scientific facilities and launching provincial labs. A set of large scientific facilities have settled in Guangdong province, including China Spallation Neutron Source which operates in Dongguan, a neutrino observatory which is being built in Jiangmen, and a high intensity heavy-ion accelerator which is still under construction in Huizhou. As for provincial labs, Guangdong plans to set up ten labs, which cover different fields such as regenerative medicine, materials, advanced manufacturing, next-generation network communications, chemical and fine chemicals, and marine research. These labs, unlike traditional scientific institutions in China, enjoy a high degree of autonomy in policy and grant spending, which means they are allowed to recruit talent from all over the world based on a market-oriented salary system.

Role of Shenzhen

Shenzhen, known as a hi-tech hub right next door to Hong Kong, is currently hosting more than 3 million businesses, including some of the world’s leading fintech and tech giants such as Baidu, Tencent and Huawei. The city has invested more than 4% of its GDP on research and development annually, which is one of the world’s highest on a global scale, and subsequently generates nearly half of the mainland’s international patent filings. According to the GBA Plan, Shenzhen is designed to become China’s Silicon Valley, consolidating its leading role as a capital of innovation and creativity. Several innovation sectors, such as 5G, AI, cyberspace technology and bio-medical technology, will get support in this city as part of the country’s effort to master key technologies. Apart from these sectors, Shenzhen plans to support digital currency research and mobile payments and is encouraged to set up manufacturing innovation centres for sectors including advanced communication devices and medical instruments. 

Nansha focus

Guangzhou is the capital city of Guangdong Province. Nansha district of Guangzhou, located in the geographical centre of the GBA, is designed as the national economic and technological development zone and national free trade zone, which has been awarded the nation’s most generous support policies for companies and talents to start their business and career in the district. Nansha also functions as a key pivot in transitioning the bay area into an international innovation and technology hub. With a total area of 803 square meters, Nansha is home to more than 400 tech-based companies, of which 43.6% have established their own R&D institute.  A science park broke ground in the district in September 2019 and will be completed in 2022. Jointly built by the Guangzhou government and the Chinese Academy of Sciences (CAS), the park will spread across around 200 hectares of land and accommodate CAS research institutes from around Guangzhou, including the South China Sea Institute of Oceanology, the South China Botanical Garden and the Guangzhou Institute of Energy Conversion. Additionally, Hong Kong University of Science and Technology (HKST) has started to build a new campus in Nansha, with the aim to help create a new avenue for exchanges and cooperation on higher education between Guangzhou and Hong Kong, as well as training more innovative talent. 

 

 

This section will centre on benefits for EU SMEs to start business in GBA and relevant stakeholders and their actions contributing to innovation acceleration and business development in GBA. 

 

Benefits for EU SMEs

Under the GBA Initiative, the GBA is on the path of rapid economic development, which is turning into a market with promising potential. Even with the recent economic downturn in mainland of China, the area is still growing at twice the OECD average and its GDP is estimated to reach USD 2.2 trillion by 2030, which will make it one of the highest earning Bay Area in the world. Shenzhen, as one of the world’s leading innovation centres located in the area, has devoted more than 4% of its GDP to R&D since 2013, providing incentives on tax, housing and funding to boost technological development. This has led to the city becoming famous for its high-tech manufacturing opportunities, telecommunications, financial and logistics industries. The GBA Initiative also provides the change for a closer integration of Hong Kong and Guangdong province, which means European businesses could benefit from Hong Kong’s high-quality infrastructure, financial and professional services combined with Guangdong’s lower cost of labour and availability of land. 

ERICENA (H2020 project)

Promoted by the European Commission (EC) through Horizon 2020, ERICENA project intends to set up the European Network of Research and Innovation Centres and Hubs (ENRICH) in China, establishing all the necessary mechanisms to ensure its long-term sustainable operation and service provision to enhance and promote European research and innovation excellence in China. ENRICH in China offers unique services to European research, technology and business organisations, connecting them to the Chinese market. The project is led by SPI, and the consortium comprises a total of 14 institutions, of which 9 are European and 5 are from China.

Within the service portfolio of ENRICH in China, European organizations can benefit from personalized Research Development and Innovation (RDI) Consultancy and Coaching, where support in the identification, selection and contact with relevant Chinese partners can be done or even support in the establishment of technology transfer agreements with local entities. Development of tailor-made sector reports, feasibility and market studies are also available through the RDI Intelligence service. ENRICH in China regularly organizes targeted training, short courses and workshops on open innovation management, knowledge and technology transfer, co-creation of products and user-driven innovation, through the Open Innovation Training service. Matchmaking sessions, roadshows, business visits, scientific exchanges, seminars and conferences that build trust and drive the exploitation of research, innovation and business collaborative opportunities are organized through the Cooperation Enabling Events service. Soft Landing and Co-working space in the different certified Soft Landing Zones in China is also provided. Any stakeholder, interested in knowing more about China and the Centre’s activities, can also follow all them latest updates in research and innovation through RDI Briefings. ENRICH is going to have a regional hub and a Soft Landing Zone in Shenzhen, aiming to provide support to European research organisations and technology-based companies who are interested in entering the GBA. In addition, ENRICH has organised a wide range of online events to offer practical information regarding this specific region, e.g. on April 6th 2020, ENRICH organised a webinar on “Internationalisation in China – IPR importance and The Greater Bay Area”. 

 

Presence of local and global tech-based companies in the GBA

Some of China’s most innovative technology firms are headquartered in the GBA, including internet giant Tencent, the world’s largest drone maker DJI, telecom innovators Huawei and smartphone maker ZTE, as well as, battery/electric vehicle (EV) manufacturer BYD, which ranks 1st worldwide in delivery of EV’s for three consecutive years. 

Additionally, a number of global tech companies like Microsoft, IBM aim to be key contributors to transform the GBA into the international innovation and technology hub. Microsoft launched its technology R&D centre in Shenzhen as early as in 2007. Later it opened an Internet of Things (IoT) lab in Shenzhen in 2016, in order to further develop loT in this region. In November 2017, the company founded the Microsoft Cloud and Mobile Incubator focusing on AI development within the Nansha and Guangzhou districts. A year later, Microsoft announced strategic alliance with more than 600 partners, collaborating with them closely in the fields of computer vision, product recognition and speech recognition to jointly develop industry solutions and go-to-market initiatives in Hong Kong and the GBA. 

 

European innovative companies in the GBA

Ericsson

Ericsson, a Swedish multinational company headquartered in Stockholm, is a leading provider of ICT to service providers. Ericsson has established long-term relationship with Guangdong province. It has more than 700 engineers in China, many of whom are based in the GBA. In November 2019, Ericsson and Guangdong-based tech company OPPO, whose products include 5G handsets, launched a joint lab in Shenzhen focused on 5G innovation. Ericsson also operates in Hong Kong, through long-term partnership with SmarTone, one of the leading communication service providers in this vibrant city of the GBA. Ericsson is the sole supplier of SmarTone’s 4G network and will continue as their sole 5G vendor. In 2020, the two companies signed a five-year contract for the deployment of 5G in Hong Kong. 

Siemens

Siemens, a German multinational company headquartered in Munich, is a technology powerhouse focused on the areas of intelligent infrastructure for buildings and distributed energy systems, and automation and digitalization in the process and manufacturing industries. As a strategic partner for the GBA, Siemens offers support to the development of this region with five focuses - enabling clean energy, developing digital manufacturing, building smart city cluster, driving innovations and nurturing talents. In June 2019, the company officially opened its first Smart Campus Demonstration Showroom in the GBA in Hengqin, Zhuhai City, with the aim of supporting the implementation of innovation-driven digital development strategy in the area. 

Airbus

Airbus is European aerospace giant and the world’s largest airliner manufacturer as of 2019. In February 2019, the company inaugurated an aerospace technology innovation centre in Shenzhen, which is Airbus’s first disruptive innovation centre in Asia and second worldwide. The Airbus China Innovation Centre (ACIC) is designed to design, test and certify new technologies related to five different areas - Hardware Lab, Cabin Experience, Connectivity, Manufacturing Innovation and Urban Air Mobility (UAM). The company also signed a Memorandum of Understanding (MoU) with Shenzhen Municipal Commerce Bureau to facilitate close collaboration, acceleration, application and industrialization of UAM. 

 

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