China Plans to Turn Hong Kong and Macau Into a Silicon Valley Rival

China unveiled a sweeping plan to link Hong Kong and Macau with cities in southern China to create a so-called Greater Bay Area, aiming to transform the coastal region into a high-tech megalopolis to rival California’s Silicon Valley.

The outline plan, published in Chinese by Xinhua News Agency late Monday, said the government will seek to turn the area into a leading global innovation hub, boost infrastructure connectivity between cities and strengthen Hong Kong’s role as an international center of finance, shipping and trade as well as the center for the offshore yuan business.

Hong Kong, Macau, Shenzhen and Guangzhou will be the four key Bay Area cities, driving the region’s economic development, according to the blueprint. HSBC Holdings Plc has estimated the region — with more than 67 million residents — would boast a trillion-dollar economy and eclipse Japan as the world’s fourth-largest exporter.

“This policy framework sets out a clear vision for a global economic powerhouse in the Greater Bay Area,” which allows cities and regions to leverage those complementary strengths more effectively, Peter Wong, chief executive of HSBC’s Asia Pacific business, said in an emailed note.

The announcement of the strategy drove stocks in the region higher. Guangzhou Port, Zhuhai Port and Shenzhen Yan Tian Port all climbed by the 10 percent daily limit.The long-heralded plan has led to unease in Hong Kong that further integration will erode the autonomy that allows the city to maintain separate legal, monetary and political systems from communist China. Though the plan emphasized the importance of maintaining the “one country, two systems” frameworks meant to ensure a high degree of autonomy for Hong Kong and Macau, it didn’t mention which customs and legal systems would predominate.

The development of the Greater Bay Area has been challenged by diverging social, legal and customs systems, according to the plan. A comprehensive blueprint can “add new impetus into the development of Hong Kong and Macau” and help build a “world-class cluster of cities,” it said.

China has already spent billions of dollars on infrastructure projects linking the cities, and the plan now envisages a strategy for the region that stretches to 2035.

President Xi Jinping last year inaugurated a $15 billion, 34-mile bridge, the world’s longest sea crossing, linking Hong Kong with Macau and the mainland city of Zhuhai. In September, Hong Kong plugged into China’s 15,500-mile high-speed rail network with a futuristic new terminus overlooking the Victoria Harbor.

The railway faced resistance from Hong Kong democracy activists because of the location of the Chinese border crossing in the terminus building. They argued it would undermine a constitutional ban on mainland law enforcement officers operating in the city. Hong Kong passed the enabling legislation in June, but only after China’s national parliament stepped in to ratify the plan.

Tech Ambitions

Under the blueprint, the major cities of the Greater Bay Area will establish themselves as hubs for different sectors.

Hong Kong will focus on international finance, navigation and trade. Macau will be an international tourism city and a platform for trade with Portuguese speaking countries such as Brazil. Guangzhou, formerly known as Canton, will take a role as an administrative hub while Shenzhen – home to Huawei Technologies Co. – will expand its role as a special economic zone and tech hub.

Enshrined within the sprawling policy is a clear intention to recreate the phenomenon that transformed the greater U.S. Bay Area over several decades into the cradle of global technology innovation.

The plan talks about building an international tech innovation center: a “global high-tech and technological innovation haven” and a “wellspring of new industry” in its own words. The strategy aims to:

Encourage sharing and cooperation in scientific and technological research between universities, institutions and enterprises around the region Supporting the establishment of R&D centers: five major areas of focus are logistics, textiles, communications technology; automotive components; nano materials Build several tech incubators in nine Pearl River Delta cities Strengthen protection for intellectual property, including a mechanism for handling cross-border IP cases Build “next-generation” Internet infrastructure, including a digital home and smart city networkThe government will also support Hong Kong and Macau banks and insurers in setting up units in some cities including Shenzhen and Guangzhou, according to the document. China will also study setting up a yuan-denominated securities market in Macau.