Opinions

Introduction

Hong Kong, the Pearl of the Orient, stands at a crossroads when its futures intertwined with the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) initiative, an ambitious plan to forge an economic powerhouse encompassing eleven cities.  While often touted for its potential to unlock new opportunities, the reality of the GBA for Hong Kong is far more complex, particularly in the face of current economic headwinds. 

The intention of the GBA initiative, primarily driven by a broader national agenda to elevate the region's global standing, has unquestionable been aiming for a collective win.  Far from a policy designed solely to benefit Hong Kong, the GBA initiative leverages Hong Kong’s existing strengths, including its financial prowess, legal systems and internation connections, to fuel the growth of other GBA cities.  This raises critical questions whether the rising tide of the regional development will lift all boats, or it might come at the expense of Hong Kong’s own economic vitality.

In the current climate of post-pandemic recovery, geopolitical uncertainties, and a shifting global economic order, the potential for unforeseen consequences for Hong Kong is magnified.  This article will examine how the GBA is influencing the flow of resources and talent within the region, impacting living standards, and reshaping Hong Kong's traditional economic base and value.

Background of GBA

The GBA concept is rooted in decades of economic collaboration between Hong Kong, Macau, and Guangdong Province.  This integration began with Hong Kong's pivotal role in China's market opening in the 1980s-90s and deepened with the signing of the Closer Economic Partnership Arrangement (CEPA) in 2003.  The completion of major infrastructure projects, such as the Hong Kong-Zhuhai-Macao Bridge, has further solidified regional connections.

The GBA initiative, formally introduced in 2017, aims to transform the region into China's economic powerhouse.  The 2019 Outline Development Plan designates specific roles for each city, leveraging the "one-country-two-systems" principle to create a world-class city cluster.  Key roles include Hong Kong SAR as a global financial hub, Macao SAR as a world-class tourism center, Guangzhou as a commerce and transport nexus, and Shenzhen as an innovation leader, whilst the remaining seven cities of Zhuhai, Zhongshan, Jiangmen, Zhaoqing, Dongguan, Huizhou and Foshan each have their own unique characteristics and roles enability the unity of the GBA.  This strategic framework emphasizes collaborative development while acknowledging each city's unique strengths.

Shifting Cross-Border Flows

The GBA initiative's impact is undeniably evident in the dramatically altered patterns of cross-border exchange and mobility.

Increased Mobility

Recent data from the Hong Kong Immigration Department reveals a dramatic shift in the flow of people since the easing of COVID-19 restrictions, as seen in Figure 1.  Daily travel between Hong Kong and mainland China has increased, particularly through land ports connecting to Shenzhen.

This surge in cross-border mobility is further fueled by enhanced infrastructure. While land crossings remain the dominant mode of cross-border travel, newer links like the Guangdong-Shenzhen-Hong Kong Express Rail Link and the Hong Kong-Zhuhai-Macao Bridge are playing an increasingly vital role. These developments, driven by the GBA's "one-hour living circle" concept, are making cross-border commuting a viable and increasingly popular option for many.

Figure 1 - Average Daily Count of Cross-Border Passengers on a Monthly Basis (Note)

Notes:

1.          Data source: Hong Kong Immigration Department through data.gov.hk

2.          Data represents average daily count of cross-border passengers flow between Hong Kong and Mainland China on a monthly basis from January 2021 to August 2024 through the following four categories of border crossings between Hong Kong and China:

o      High Speed Rail: Hong Kong West Kowloon Station, servicing the Guangzhou-Shenzhen Hong Kong Express Rail Link

o      Land: Traditional land border crossings

o      Bridge: Hong Kong-Zhuhai-Macao Bridge

o      Sea: Sea ports and ferry terminals

3.          This ignores the counts from Hong Kong International Airport for simplicity sake.

4.          Pre-2023 data shows minimal cross-border movement due to strict pandemic control measures. The sharp increase in early 2023 corresponds to the lifting of COVID-19 travel restrictions between Hong Kong and Mainland China.

5.          Seasonal fluctuations are visible across all modes of transport, likely corresponding to holiday periods and business cycles.

6.          This visualization excludes cross-border goods transportation and focuses solely on passenger movements.

A Reversal of Fortune: From Parallel Trading to Outbound Consumption

The COVID-19 pandemic triggered a striking reversal in cross-border flow patterns. Before the pandemic, Hong Kong grappled with "parallel trading," where mainland visitors flooded border towns like Sheung Shui and Yuen Long to purchase goods in bulk for resale. This phenomenon disrupted the local community, caused pedestrian  and traffic gridlock, drove up the rental prices, and created inflationary pressure, which is a price Hong Kong had to pay for its economic prosperity. The government's attempt to redirect this activity with "The Boxes" shopping complex in San Tin faltered due to its isolation and lack of appeal compared to established shopping areas.

However, the post-pandemic reality is starkly different. Data from the Hong Kong Immigration Department reveals a significant asymmetry in cross-border travel as shown in Figure 2. By August 2024, daily outbound travel from Hong Kong to the mainland was nearly triple the number of inbound mainland visitors. This shift is particularly pronounced in Shenzhen, which has emerged as a primary destination for Hong Kong residents, drawn by its leisure options in theme parks, resorts hotels and diverse dining options, as well as affordable grocery shopping for daily necessities. 

Figure 2 - Average Daily Counts of Inbound Mainland Visitors and Outbound Hong Kong residents (Note)

Notes:

1. Data source: Hong Kong Immigration Department through data.gov.hk

2. Data represents average daily count of inbound Mainland visitors and outbound Hong Kong residents on a monthly basis from January 2021 to August 2024 through the following four categories of border crossings between Hong Kong and China:

o High Speed Rail: Hong Kong West Kowloon Station, servicing the Guangzhou-Shenzhen Hong Kong Express Rail Link

o Land: Traditional land border crossings

o Bridge: Hong Kong-Zhuhai-Macao Bridge

o Sea: Sea ports and ferry terminals

3. Pre-2023 data shows minimal cross-border movement due to strict pandemic control measures. The sharp increase in early 2023 corresponds to the lifting of COVID-19 travel restrictions between Hong Kong and Mainland China.

4. Seasonal fluctuations are visible across all modes of transport, likely corresponding to holiday periods and business cycles.

5. This visualization excludes cross-border goods transportation and focuses solely on passenger movements.

Shenzhen's Transformation: A Magnet for Hong Kong Residents

This surge in traffic is palpable in Shenzhen's daily life. Social media platforms like Xiaohongshu (Little Red Book) are teeming with videos and posts highlighting the growing presence of Hong Kong visitors. Subway stations with interchanges connecting to border crossings are visibly crowded with Hong Kong travelers, as documented in numerous user-generated videos. This anecdotal evidence is supported by unofficial data from metrodb.org, a website tracking city railway data in China. As shown in Figure 3, Shenzhen's MTR ridership surged by 72.14% from 2022 to 2024, dramatically outpacing Guangzhou's 36.13% increase over the same period.

Fig 3 – Average Daily Passenger Flow on MTR by year (‘000)

Notes:

1. Data source: metrodb.org

2. The methodology of metrodb.org collecting the data is by crawling the public disclosure from the official social media channel of the corresponding cities’ train operator announcing the daily passenger flow

3. The data is not verified by metrodb.org or the author.

This influx is not merely about proximity or convenience; it signifies a deliberate lifestyle shift for many Hong Kong residents.  Online forums and social media buzz with discussions about the advantages of living in Shenzhen while working remotely for Hong Kong or international companies.  Lower cost of living plus the improvement of quality foods are frequently cited as primary motivators, allowing residents to maintain their professional ties while enjoying a more affordable and potentially higher quality of life.  This growing trend of cross-border living reflects a pragmatic response to the economic realities of Hong Kong, with Shenzhen offering an attractive alternative. Furthermore, a significant number of the visitors are attributable to Hong Kong elderly citizens, who enjoy the benefits of JoyYou Card, which offers HK$2 subsidized fares on Hong Kong public transport, and take advantage of the free ride policy on Shenzhen’ city railway available to all individuals aged 60 or above, inducing additional mobility. 

Impact on Shenzhen's Retail and Social Landscape

The impact on Shenzhen's retail landscape is palpable. Shopping malls and popular stores are experiencing heightened activity, with Hong Kong visitors boosting foot traffic. A telling example of this trend occurred in autumn 2023 when a Freshippo outlet in Shenzhen, overwhelmed by Hong Kong customers seeking affordably priced Chinese mitten crabs, expanded its dining area to accommodate the demand.  This incident, widely shared on social media, illustrated how businesses are adapting to cater to the preferences of this new consumer base.

Challenges for Hong Kong's Businesses and Adaptation Strategies

On the Hong Kong side, the effects of this outflow are becoming increasingly apparent.  As shown in Figure 4, Hong Kong’s total retail sales value from the Census and Statistics Departments recorded consistent negative growth year-on-year since March 2024, despite the the Hong Kong SAR government’s efforts such as the “Night Vibes Hong Kong” and the promotion of mega-events.  

Figure 4 – Hong Kong Total Retail Sales Value Year-on-year % Change

Data source: Census and Statistics Department

The shift in consumer behavior is impacting local businesses, particularly in the retail, dining, and leisure sectors. Hong Kong's shopping districts, once bustling with both local and tourist activity, are experiencing changes in foot traffic and spending patterns. Restaurants, food stalls, and trendy establishments like bubble tea shops in Hong Kong are facing challenges, with some areas seeing higher turnover rates of tenants. While there are still visitors from Mainland China coming to Hong Kong, unlike the pre-pandemic days, many seek cultural experiences and ecological discovery, cutting their travel costs. This suggests that a portion of the discretionary spending that would have occurred in Hong Kong is now being redirected to Shenzhen and other GBA cities.

This trend puts pressure on Hong Kong's retail and hospitality industries to innovate and adapt.  Some opportunity seekers try to introduce brands from Mainland China to Hong Kong for the replication of success from their origins.  However, this does not sound like a long-term strategy as the cost structure of operating in Hong Kong, mainly attributable to rental and labor costs, is not comparable to that of its Mainland counterpart.  Judging by the negative comments and reviews of certain renowned Shenzhen restaurants that have opened branches in Hong Kong, their journey appears to be an arduous one.

Labor Market Transformations

The evolving dynamics of cross-border mobility and economic integration within the Greater Bay Area are profoundly reshaping the region's labor markets. These changes are having significant implications for wage trends and workforce mobility across Hong Kong and other GBA cities.

Narrowing Wage Gaps and Shifting Economic Opportunities

An analysis of average monthly salaries across four key GBA cities from 2019 to 2023 reveals persistent disparities, with Hong Kong consistently maintaining the highest average monthly salary at HK$19,800 in 2023 as shown in Figure 5. However, the gap between Hong Kong and Shenzhen has narrowed significantly, from HK$6,489 in 2019 to just HK$3,791 in 2023 as shown in Figure 6. This convergence reflects Shenzhen's rapid economic ascent and growing appeal as a tech and innovation hub.

Figure 5 - Average Monthly Salary Across 4 Key Cities in GBA (HK$)

Figure 6 - Average Monthly Salary Discrepancy – Hong Kong and Shenzhen (HK$)

While Hong Kong maintains its lead, Shenzhen's growth trajectory is remarkable, nearly catching up to Macau by 2023. This shifting landscape of wage levels and growth rates is a key factor in the evolving labor market dynamics of the GBA. The narrowing wage gap, combined with the lower cost of living in mainland GBA cities compared to Hong Kong, is shifting the economic calculus for many workers. 

A 2022 survey by HSBC and Oliver Wyman found that 72% of Hong Kong residents are attracted to opportunities in mainland GBA cities, indicating a growing openness to "cross-border careers."  This trend is mirrored in the education sector, with rising numbers of Hong Kong students enrolling in GBA universities and an expansion of satellite campuses of Hong Kong universities in mainland GBA cities.  Furthermore, over 80% of those interested in GBA opportunities are exploring property investments in mainland cities, signaling a willingness to establish roots across the border.

This movement is not unidirectional. Workers from the mainland are also seeking job opportunities in Hong Kong. However, as a post from the social media platform Xiaohongshu reveals, this cross-border labor flow presents a dichotomy.  While attracted by the prospect of higher wages, a mainland worker in Hong Kong expressed the trade-offs of sacrificing work-life balance and leisure time. This underscores cultural differences in work across the border, which can be challenging to reconcile, even with the allure of higher salaries.

Remote Work and Labor Mobility

The post-pandemic landscape has accelerated the trend of remote work, adding a new dimension to cross-border labor dynamics.  A growing number of Hong Kong professionals are choosing to relocate to GBA cities like Shenzhen while continuing to work remotely for Hong Kong-based companies. This arrangement allows them to maintain their Hong Kong salary while benefiting from the lower costs and often more spacious living conditions in mainland cities.

This trend represents a significant shift in traditional work and residence patterns.   These remote workers occupy a unique position – physically present in one city but economically tied to another.  This new dynamic presents both challenges and opportunities for Hong Kong and GBA cities alike.

For Hong Kong, concerns include potential reduced local consumption and changes in workforce composition.  This arrangement might allow Hong Kong companies to retain some talents that might otherwise have fully relocated.  GBA cities benefit from increased local spending by these remote workers, even if they are not fully integrated into local labor markets.  This influx of workers may also foster knowledge transfer and cross-border collaboration.

These evolving dynamics occur against the backdrop of Hong Kong’s declining labor force and participation rate in Hong Kong over the past several years as illustrated in Figure 7.  The combination of this remote working trend and the ongoing labour force reduction presents an exacerbating picture of a potential drain, posing significant challenges for Hong Kong’s economic vitality and competitiveness within the GBA and the region.  

Figure 7 – Hong Kong Labor Force (’000) and  Labor Participation Rate (%) from 2018 to 2024

The Commuter Effect: Blurring Geographic Boundaries

Alongside permanent relocation, the growing ease of cross-border mobility, facilitated by infrastructure projects like the Hong Kong-Zhuhai-Macao Bridge and the Guangzhou-Shenzhen-Hong Kong Express Rail Link, is also giving rise to a new class of cross-border commuters. Increasingly, professionals are choosing to live in one GBA city while working in another, drawn by a combination of economic opportunities, lifestyle factors, and family considerations.

For example, some Hong Kong residents are moving to Shenzhen for lower housing costs while continuing to work in Hong Kong, making the daily commute across the border. Conversely, some professionals from mainland GBA cities may potentially be taking jobs in Hong Kong while maintaining their residence on the mainland. This fluidity is creating a more integrated labor market but also poses challenges for public services, infrastructure, and urban planning as cities grapple with the needs of a workforce that doesn't necessarily reside locally.

Moreover, education has emerged as a crucial factor in the decision-making process for young families considering cross-border living. Previously, some families opted for a challenging arrangement where children resided in Shenzhen but commuted daily to Hong Kong for schooling. However, the recent establishment of schools for Hong Kong students (港人子弟學校) across GBA cities has significantly altered this landscape. These institutions offer curricula aligned with Hong Kong's education system and prepare students for the Diploma of Secondary Education examination, a key qualification for university admission in Hong Kong. Consequently, Hong Kong families are increasingly willing to settle in GBA cities, knowing their children can access quality education that maintains continuity with the Hong Kong system. This development has further facilitated the growth of cross-border living and working arrangements, as families can now balance career opportunities with the educational needs of their children within the broader GBA region.

Challenges and Policy Implications: Navigating a Complex Landscape

The post-pandemic economic headwind prompted the HKSAR government to reposition its strategy for labor market intervention, as evidenced by the recent decision in September 2024 not to approve new quotas for the construction industry. his policy shift underscores a complex paradox in Hong Kong's labor market: while the supply of laborers is dropping, necessitating importation since 2023, the demand for labor is simultaneously declining due to persistent economic challenges, with no substantial rebound predicted in the short-term future.

As economic uncertainty persists, improved cross-border mobility may not ease the burdens of the economic climate but could further intensify output reduction. The continued decline in Hong Kong's labor force, coupled with remote work arrangements and the commuter effect, is likely to exert increasing downward pressure on economic growth. The situation is particularly alarming as it represents not just a quantitative decrease in the workforce but also a qualitative shift in how and where economic value is generated within the GBA. The implications of these trends extend beyond Hong Kong's borders, affecting the entire Greater Bay Area ecosystem.

For Hong Kong, the challenge lies in balancing the need to maintain a robust local workforce with the realities of an increasingly mobile and interconnected regional labor market. Policymakers must grapple with questions of how to retain and attract talent, support local industries, and ensure economic vitality in the face of these changing dynamics. 

For other GBA cities, particularly those receiving Hong Kong's remote workers, there's a need to consider how to effectively integrate and leverage this influx of skilled professionals. While these workers may not be directly participating in local economic activities, their presence could potentially stimulate indirect economic benefits and knowledge transfer.

As the lines between local and regional labor markets continue to blur, policymakers, businesses, and workers alike will need to adapt to a new paradigm of work that transcends traditional geographic and regulatory boundaries. The ability to navigate these changes effectively will be crucial in determining the future economic trajectory of both Hong Kong and the Greater Bay Area as a whole.

Outlook: Gear Up to Acquire Talents

Hong Kong's integration into the Greater Bay Area (GBA) promises both opportunities and challenges. While the city's economic landscape and labor market are undeniably transforming, the current trajectory raises concerns about its ability to attract and retain talent.  The narrowing wage gap with cities like Shenzhen, combined with the rise of remote work and cross-border commuting, points towards increased labor mobility and economic interconnectedness. While this presents some opportunities, it also raises significant concerns about Hong Kong's ability to remain competitive.

To attract talent, the Immigration Department has launched several schemes over the years.  These include the Admission Scheme for Mainland Talents and Professionals (launched in 2003, replacing the earlier initiatives), and Technology Talent Admission Scheme (introduced in 2018), and the more recent Top Talent Pass Scheme (announced in the Chief Executive’s 2022 Policy Address). However, initial results have been lackluster with consistently lowered labor force.  While it's reasonable to expect improvement with more favorable conditions, such as tax breaks, housing subsidies, faster visa processing, concrete action is urgently needed.

If current trends continue unabated, Hong Kong faces the risk of a hollowing out of its middle class with soaring income inequality, a decline in global competitiveness, and an exodus of talent seeking greener pastures within the GBA.  The city's traditional strengths in finance and trade may erode as other GBA cities, like Shenzhen, attract investment and talent in emerging sectors. The outflow of residents seeking a lower cost of living in the GBA could lead to reduced local consumption and a shrinking tax base, further straining Hong Kong's social safety net and public services.

Conclusion