Zhuhai hopes bridge building with Hong Kong and Macau will pay off

The southern Chinese city of Zhuhai is pinning its hopes on a new bridge linking it with neighbouring Macau and Hong Kong to help it become the next hotspot in the sprawling Pearl River Delta area. The bridge, as well as a new pilot free zone which spreads from the Hengqin island south of the city and right across to Macau, is being integrated with a push by local authorities to attract growing volumes of foreign investment. A new business district in the city is already in use, alongside entertainment, tech and industrial parks. They are all waiting for the bridge to open, which they hope will put Zhuhai in a position to replicate or tap into the success of Macau and Hong Kong.

“The arrival of the bridge shows that the area is becoming a hotspot for development and investment,” says Graham Mather, chairman of the World Free Zone Convention.

Worth the wait

Work at the 50-kilometre bridge running between Hong Kong, Macau and Zhuhai commenced in 2009. With a price tag estimated to exceed Rmb115.9bn ($17.2bn), technical and budgetary issues have repeatedly delayed the project, whose first section is now slated to open at the end of 2017. It will shorten travel times between Zhuhai and Hong Kong to about 40 minutes, just a fraction of what it takes today using existing connections, augmenting Zhuhai’s proposition as a complementary investment destination to Hong Kong and Macau.

“This is very important to the local authorities,” says Stephen O'Regan, a Guangzhou-based senior associate at advisory firm Dezan Shira. “They are trying to push more investment into their city, and they will get that investment by making it easier for foreign companies to enter.”

Waiting for the bridge to open, the Hengqin New Area pilot free zone, which was officially launched in 2015, already welcomes visitors with state-of-the-art infrastructure and a number of landmark sites such as its campus of the University of Macau or its huge entertainment area, the Chimelong International Ocean Resort. Investors in Hengqin face lower entry barriers than anywhere else in China, as the zone uses a reduced version of the list of sectors in which foreign investment is banned at a national level. Additionally, companies active in Hengqin are subject to corporate income tax of 15%, against a standard 25% applying throughout the country – a benefit available only in other two pilot free zones (Shenzen Qianhai and Fujian Pingtan).

China's liberalisation push

The development of the Zhuhai area is part of Beijing’s broader effort to step up efforts to liberalise and upgrade the country's economy through free-trade zones. The Shanghai area was first designated as a pilot free-trade zone in 2013. Three new pilot zones in Guangdong, where Hengqin lies, Fujian and Tianjin were added two years later. Beijing then announced a new wave of seven new experimental free-trade zones earlier in 2017.

“Chinese free-trade zones are beginning to compete with different selling points. As the internal competition among free zones increases, they will have to further differentiate their offerings, and try to clarify what the advantages are to overseas investors,” says Mr Mather.

Beijing is altering its list of banned sectors for foreign investment, as well as applying other incentives to channel investment towards high-end, high-added-value manufacturing, and financial and logistics services. However, Chinese free zones are still relatively inexperienced when it comes to pushing such strategies, and their success will likely hinge on the ability of local authorities to come up with a successful marketing strategy, in Zhuhai and throughout the rest of the country.