The special economic zone on the southern tip of Guangzhou is experimenting with some bold, innovative reforms. From the farmlands of Hengli Island, a new financial powerhouse is rising, writes Anthony Lawrance of Greater Bay Insights
It seems like every city wants to be a World Finance Centre these days. In fact, many Chinese cities have more than one tall building with such a name on its door. In the Greater Bay Area, Hong Kong’s Central district springs to mind as the region’s leading financial area. Or, within Guangdong, perhaps the cluster of high-rises in Guangzhou’s Tianhe district or Shenzhen’s Qianhai could qualify for the designation.
But a World Financial Island? Now, that is different. There is only one of those in the Great Bay Area (GBA). It’s being built on a small corner of the Nansha New Area, on an island called Hengli.
This world financial island is one of three main special economic zones, built after Qianhai and Zhuhai’s Hengqin. The Nansha government is in charge of it and recently released its masterplan for the area, calling it the Nansha Pearl Bay Hengli Island.
The 589.26-hectare island is mostly green space at the moment with a flurry of construction going on as buildings rise from the dirt, but it is expected to become the “heart of Nansha”.
The local government has grand ambitions for it, which are enthusiastically supported by successive layers of government above it, from Guangzhou to Guangdong, and all the way up to Beijing.
This is one of those places that will go from nothing to something big within the space of a few years. Not decades. Years. Five years ago, it was farmland. Today, it is what’s known as a “pre-modern city”. Five years from now, it will have its own international commercial bank, a futures exchange, an international conference centre, and a cluster of public facilities to support its growth, such as transportation networks, hospitals, schools and kindergartens.
Unlike any other special zone in the GBA, however, these institutions will benefit from remarkable privileges. Why? Because Hengli is the first “international financial island” in the country.
An island with dreams of being a global financial centre. If Hong Kong could do it, so can Hengli
Located roughly in the middle of Nansha, Hengli Island is considered to have the most potential among the four areas of the Pearl Bay, which includes Lingshan Island, Hengli Island, Jiaomen Estuary, and Huigu West District. It is almost perfectly centred within the GBA, equidistant from downtown Guangzhou, Shenzhen, Hong Kong and Macau.
Currently, it takes a bit of effort to reach Hengli. But soon it will be possible to reach all of these major cities in less than an hour, thanks to newly built rail lines.
Hengli’s northern neighbour, Lingshan Island, has been a successful role model to follow. The small island has attracted nearly a dozen large companies to set up their headquarters there, including the state-owned Yuehai Group, which recently bought two blocks of land here for RMB 700 million.
Lingshan did this by allowing large state-owned enterprises to directly invest and operate major infrastructure construction projects in the area since its launch in 2014. This accelerated its development.
Hengli is doing the same. China Communications Construction has so far invested a total of RMB 20.8 billion into the island.
More importantly, Hengli will take advantage of a list of essential policies by the higher-ups that should see it grow even faster – and it has twice Lingshan’s land area.
The most important of these gifts is Hengli’s official designation as a “world financial island”. The concept first surfaced in 2017, in a formal cooperation agreement between the Nansha Government and the International Finance Forum (IFF), a body established by the central government in cooperation with the United Nations Development Programme.
The IFF may have an innocuous-sounding name, but it is a crucial institution in Beijing’s eyes, as it aims to provide a dialogue channel for international financial cooperation and innovation.
Hengli has been chosen to be the IFF’s permanent conference venue. A new operation centre is being built for it on a large plot of land, with RMB 3.5 billion of investment. Its detailed construction plan will be finalised in September and construction is likely to begin in November.
That is what is known in the real-estate business as a “cornerstone tenant”. But it is not all. Nearby, a whole new business district is going to house branches of some of the country’s major financial institutions. They span shipping finance, fintech, financing and leasing. And at their heart will sit perhaps the GBA’s most ambitious financial project of all: the GBA International Commercial Bank.
This will not be just another bank, with a GBA nametag on it. It will be a trailblazer for cross-border financial flows.
Wang Fuqiang, head of the GBA strategic research team of the China Centre for International Economic Exchanges, says, somewhat understatedly, that the bank will “enjoy a certain degree of autonomy in currency convertibility”.
Think of it more like a regulatory body than a bank, per se. It will be able to manage the foreign-exchange quotas of companies, banks, and other financial institutions, which is currently run by the State Administration of Foreign Exchange.
The government is vetting eligible international commercial banks to serve as the founding institutions operating under the GBA Bank, which will channel funds to them from the government and the private sector, including investors from Hong Kong and Macau.
The Futures Exchange, meanwhile, is expected to lead a pilot zone of “green financial reform and innovation,” and will initially be trading carbon emission-based futures products. It was part of the GBA masterplan, and a detailed action plan for the construction will be released later this year.
Hengli is not the only space in Nansha that has financial dreams. The entire zone has already been testing reforms in the sector, with policies designed to boost cross-border finance flows. Recently these included two-way RMB loans and cross-border asset transfers, with volumes having reached RMB 300 billion already. This is tiny compared to bigger jurisdictions, but it is a promising start.
Like bees to a honeypot, financial companies have been drawn to Nansha for the past five years. Official figures show 6,439 financial enterprises have settled in Nansha since it was officially declared a Free Trade Zone in 2015. Some of them are global names, like JP Morgan Futures, as well as Chinese heavyweights such as Postal Savings Bank of China (PSBC) Consumer Finance, and Fosun Health Insurance Company.
It is not all about business. The Nansha government is addressing lifestyle issues, too. It is investing RMB 15 billion to improve the healthcare facilities in the area, including building a branch of the dentist hospital of Sun Yat-Sen University, and expanding Hengli’s No.3 People’s Hospital. On the west side of the island, it is developing high-end living communities.
But hasn’t this all been done elsewhere, one might wonder?
Not really. Nansha is positioning itself differently. For instance, the scope of its sister special economic zone, Qianhai, is to cooperate with Hong Kong and test reform measures based on the way the SAR works. Hengli is circumventing all that and aiming to become a standalone international finance centre in its own right.
This is not to say that Nansha will be trying to eat Hong Kong’s lunch. It is also working hard to support Hong Kong in mutually beneficial ways, such as expanding the wealth-management business in both jurisdictions.
An island with dreams of being a global financial centre. If Hong Kong could do it, so can Hengli. Watch this space.