With central government firmly behind the Plan and the Northern Metropolis scheme mooted, success depends on HK business confidence
Qianhai Cooperation Zone is garnering increased investor attention, especially since the new Qianhai planning policy was launched last year.
The Qianhai Plan – the "Comprehensive Deepening Reform and Opening Up of the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone” – promulgated by the central government in September 2021, banks on potential synergy with Hong Kong and fostering a more integrated business environment to attract private-sector participation. The market expects a surge in demand for Grade-A office space and prices to rise accordingly. So, should investors seize the opportunity to get in early?
No sooner had the Qianhai Plan passed than Hong Kong’s Chief Executive Carrie Lam outlined the idea for the Northern Metropolis in her 2021 Policy Address. The Northern Metropolis scheme will develop the northern part of the New Territories with, among other things, extensive cross-boundary transport links – notably the western part of the Northern Metropolis to the Qianhai Cooperation Zone to pave the way for further integration.
Roadmap to development
The Qianhai Plan earmarks more than 100 sq. km. for geographical expansion to accommodate more business and any of the renewed preferential policies the Zone might be granted.
The first Qianhai plan, in 2010, covered 14.92 sq. km. and comprised three core areas – global financial technology, information services, and logistics. Over the years, the IT, Financial and Legal sectors have flourished, attracting some notable office tenants. It had also attracted around HKD30 billion in Hong Kong investments by 2020, and as of 2021, was home to more than 500 start-ups.
"Qianhai is earmarked as one of the Greater Bay Area’s core financial hubs – it will have the full weight of the central government behind it."
Qianhai is earmarked as one of the Greater Bay Area’s core financial hubs – it will have the full weight of the central government behind it. Beijing’s direct involvement significantly reinforces the approach and enhances the Zone’s prospects.
Open for business and investment
The Plan sets new development directions and objectives for Qianhai up until 2035. The previous cooperation focused more on industries and social welfare. However, now it will be more all-rounded and in-depth, especially regarding the economy, social development, culture, social welfare and ecology.
Many institutional changes and innovative reforms have been included to attract more foreign capital and encourage private enterprises to enter the Zone. For example, the tax concessions and subsidies to attract Hong Kong-invested enterprises have been extended; continuing judicial reform to bolster legal professionals’ security and confidence may bring in more tenants from this sector to service the increased demand for arbitration.
Qianhai Cooperation Zone already has well-established industrial clusters and robust infrastructure. The geographical expansion will allow for significantly more enterprises with greater industrial diversity. Service-based enterprises will be able to flourish as the bigger, better, Qianhai will have more room for institutional innovation and industrial restructuring and upgrading.
While regulations and markets allow capital and talent to flow freely to and from Hong Kong, the Plan also focuses on creating a more open, international business environment favourable to overseas investors. We expect modern service industries will be eager for office space.
"We expect modern service industries will be eager for office space."
According to Colliers’ research, Qianhai’s contribution to Shenzhen’s overall office net absorption grew consecutively from 2017 to 2020. In 2021 the office market recorded outstanding results, with vacancies dropping below 30% in H2.
Office supply was slated to grow by some 1.4 million square metres from 2021 to 2025, much more than the expected new supply in districts such as Futian CBD and Hi-Tech Park. The Plan’s renewed policies support Qianhai’s business environment and boost expectations of further growth.
Possible challenges and solutions
Although Qianhai’s prospects seem positive, given the uncertainties, it may take some time to realise its goal. The Qianhai Plan requires Hong Kong's involvement to progress further. However, during the Policy Address, the Hong Kong public was only given a broad vision of possible synergy with Qianhai, which lacked concrete details.
"During the Policy Address, the Hong Kong public was only given a broad vision of possible synergy with Qianhai, which lacked concrete details."
One of the critical concepts of the bigger picture is the proposed rail link between Hung Shui Kiu and Qianhai, which will shorten the cross-border commute time to around 15 minutes. Prioritising this railway line will go a long way to building a solid base on which both Qianhai Cooperation Zone and Northern Metropolis will flourish.
However, it will not be easy for the Hong Kong Government to convince the public that the plan’s benefits outweigh its disadvantages, as rail projects are generally viewed as loss-making ventures. This belief fails to consider the massive time-cost saving and the value enhancement it brings to nearby lands and properties.
"Whether the Hong Kong business community recognises the potential and participates in the Plan has been a niggling concern."
Over the past decade, Hong Kong’s lack of enthusiasm has hindered Qianhai’s development. The Plan’s success largely depends on the attitude of Hong Kong and foreign businesses. Whether the Hong Kong business community recognises the potential and participates in the Plan has been a niggling concern. Such an approach should be abandoned; the government should proactively promote the idea to the business community to strengthen investors’ confidence.
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