Topics in this section: - Greater Bay Area retail sales to reach $1.7 trillion by 2035 - Annual retail sales to reach $1.7 trillion by 2035 - Hi-tech shifts to boost incomes - More retail investments into China
This analysis is by Bloomberg Intelligence senior analyst Francis Chan and contributing analysts Catherine Lim and Sheng Tan Zhu.
Total retail sales in Guangdong province, Hong Kong and Macau could rise 6% a year to exceed that of Japan's through 2035, we calculate. The development of the Greater Bay Area (GBA) into China's economic and technology hub should boost local incomes, particularly those in Guangdong, as high-tech industries expand in the province.
Annual retail sales to reach $1.7 trillion by 2035
These analyses are by Bloomberg Intelligence senior analyst Francis Chan and contributing analyst Catherine Lim.
We calculate that retail sales in Guangdong province, Hong Kong and Macau could reach $1.7 trillion by 2035, surpassing our projection for Japan of $1.67 trillion. Japan's retail sales, which rose 1.2% last year to $1.3 trillion, could rise 1% annually into 2035 amid lower birth rates and an aging population. Our projections for a 9% hike in retail sales within Guangdong's GBA cities and 10% across the rest of the province over 2019-22 are based on the likelihood of higher incomes. Growth in income led to yearly retail gains of 12% in the last decade and will likely persist as the GBA develops into China's economic and technology hub. Retail gains could slow to 5-6% a year from 2023-35 as Chinese shoppers become more discerning in their purchases.
We estimate retail sales growth in Hong Kong will grow 2% a year in 2019-35.
Hi-tech shifts to boost incomes
The rise in GBA's per capita income could accelerate as high-tech industries expand in the region. China may hasten the build out of GBA as the national hub of technological innovation after Huawei became the first home-grown company to suffer global restrictions in scientific know-how and supplies from a U.S. ban this year. The likelihood of government subsidies for expanding technology companies in GBA may attract investments to the region and help create more tech jobs locally. These employees could command higher wages than workers at export-based manufacturing plants, which made up two thirds of Guangdong's output in 2018.
Annual wage gains in the GBA could exceed those of Beijing and Shanghai through 2035. The yearly rise of Silicon Valley's incomes surpassed those in Washington and New York over 2010-2017.
More retail investments into China
Hong Kong retailers will likely raise their investments into China to capture the rise in local consumption, particularly in the southern province of Guangdong. The transfer of trade and financial expertise from Hong Kong to China, which has been taking place over the last two decades, could accelerate under GBA's plans. These may narrow gaps in economic development and affluence levels within GBA, where Guangdong currently lags Hong Kong. The resulting gains in retail sales across the province, which exceeded Hong Kong's over the last nine years, will likely prompt the city's retailers to shift more to China.
Per capita GDP of the nine GBA cities in Guangdong were half of that of Hong Kong in the last two years. This underlies more opportunities for their local economies to expand vs. those in Hong Kong under GBA plans.
