SMEs Remain Confident in Growth Prospects of the Greater Bay Areaby Fintech News Hong Kong February 16, 2023
In the Guangdong-Hong Kong-Macao Greater Bay Area (GBA), small and medium-sized enterprises (SMEs) are confident in the growth prospects of the region, an optimism that’s evidenced by their plans to invest in capital expenditures and expand their business, a new study conducted by management consulting company Bain & Company found.
These findings, revealed in a report released in January 2023, were drawn from a survey of leaders from more than 460 SMEs in the GBA.
The study sought to understand businesses’ views on the region’s economic potential as well as their financial needs, attitudes, and preferences related to cross-boundary financial products.
Government’s role in bolstering SMEs’ growth
Results of the study show that SMEs in the GBA largely have a positive view on the growth prospects of the region, expecting long-term (2025-2035) economic growth to be similar to or stronger than the region’s historical growth.
70% of SMEs shared optimism and enthusiasm about the government’s interconnectedness programmes and about 80% of SMEs said they would like the government’s initiatives to be implemented faster.
The GBA is a megalopolis consisting of nine cities of Guangdong Province plus the Special Administrative Regions of Hong Kong and Macao.
With a combined population of over 86 million and a significant gross domestic product (GDP) of US$1.7 trillion in 2020, the GBA is an important national economic development strategy for the Chinese government.
China envisions the region as an integrated economic area and seeks to develop the GBA into a world-class technology, innovation, and e-commerce hub by connecting the cluster’s talent, research and development (R&D) infrastructure, and financial resources.
Several policies have been launched to pursue these aspirations, focusing in part on promoting interconnectivity, encouraging business development and attracting critical talent, including tax policies, settlement incentives, and rent subsidies.
In the GBA, businesses see bright economic prospects, results of the Bain & Company study show, a sentiment that’s displayed in their keenness to invest in the region.
About 80% of the mainland SMEs and 60% of Hong Kong SMEs surveyed expect to invest 15% or more of their revenues in the next year. In comparison, on average, listed Chinese companies invested 6% of their revenues in capital expenditures between 2017 and 2021.
Addressing GBA SMEs’ financial needs
SMEs in the GBA also shared ambitions to tap into the region’s new interconnectivity capabilities to expand across the GBA. Half of the SMEs in mainland China surveyed indicated wanting to expand southward, while 75% of Hong Kong SMEs shared a desire to expand within mainland GBA cities.
To support their expansion plans, SMEs are demanding fast, convenient and digital-first cross-boundary financial products, showcasing high interest in cash management, payments, remittances, wealth management and insurance products.
Over a third of the mainland SMEs surveyed said they are interested in or already own insurance and loan products from Hong Kong, and 48% said they are interested in or are already using wealth management services from Hong Kong.
Mainland SMEs said they are attracted to Hong Kong’s wealth management products because they have better liquidity, easier access to foreign exchanges, and the potential to diversify risk.
Likewise, SMEs in Hong Kong shared interest in mainland financial products, with over a third of respondents stating that they are either interested in or already own insurance, loans, and wealth management products from the mainland.
Hong Kong SMEs said they primarily seek cross-boundary products that will satisfy their business needs, including health and life insurance for employees in mainland China.
Demand for funding in the GBA also is high, with many SMEs reporting being underbanked, lacking collateral or being unable to meet the high documentation requirements.
About 60% of mainland SMEs and 35% of Hong Kong SMEs said they still need to secure a significant amount — more than 40% — of the funds they require for domestic investments and operations in the next three years.