Topics in this section: - Banking revenue set to double on China's Greater-Bay ambition - Targeted easing measures to lower Greater Bay integration hurdle - Guangdong cities retail banking growth to fuel revenue - Greater-Bay integration fosters more revenue, cost savings - Financials lead other industries with Greater-Bay goals - Capital movement, regulations top financials' hurdles
These analyses are by Bloomberg Intelligence senior analyst Francis Chan.
Banking revenue could double to $278 billion in 2025 in China's Greater Bay Area, which has a population of 70 million and potential $4.6 trillion in GDP by 2030. The integration plans will harness capital and people flows between Hong Kong, Macau and the mainland, with most business hurdles easing over the coming decade, in our view.
Targeted easing measures to lower Greater Bay integration hurdle
Bloomberg Intelligence expects key integration barriers in the Greater Bay Area to diminish by 2030, given measures focusing on capital movement, regulatory alignment and people flow. The central government may selectively open capital-account items to Hong Kong and Macau, which would relax cross-border securities investments. China may enhance financial regulatory alignment across Hong Kong, Macau and Greater-Bay cities, with free-trade zones likely partially carrying out cross-border capital services. The hurdle to people flow may also be lowered, enabling northbound and southbound emigration and travel. Mainland Chinese residents may no longer need permits to visit Hong Kong and Macau some time before 2030.
Guangdong cities retail banking growth to fuel revenue
Our banking market size scenario assumes 10%-a-year revenue growth in the nine Guangdong cities and 8% in Hong Kong and Macau, with most of the topline gains from retail banking. The region's pretax earnings for banks may total $148 billion in 2025, up from $72 billion in 2017. Improved intra-region integration will boost bank revenue for both Chinese and foreign banks, while their Greater-Bay plans will lead to more expense savings. We derived our revenue and pretax profit calculations from the largest Chinese and foreign banks with operations in the region.
We expect the region's revenue pool to exceed $185 billion in 2021, four years earlier than HSBC's forecast dated 2015.
Greater-Bay integration fosters more revenue, cost savings
Improving integration within the Greater Bay Area means more revenue and cost-saving opportunities for Hong Kong, Macau and Mainland banks. Easier commutes should fuel home sales, lifting mortgage demand. Cross-border sales of personal loans, credit cards, wealth products and insurance will grow as related regulations will be loosened in the area. Banks can gain access to a larger corporate market, with customers in various industries including technology, property, manufacturing and transportation. Capital market participants and investors will be able to tap a bigger pool of products denominated in yuan and other currencies. Finally, Hong Kong and foreign banks could move offices and functions to lower-cost Guangdong cities.
Financials lead other industries with Greater-Bay goals
The financial industry is targeting strategic growth in the Greater Bay Area more than other sectors, according to a survey by HSBC and KPMG. 72% of financial firms surveyed had strategic plans for the area, followed by healthcare's 67% and technology's 66%. HSBC has focused on the Pearl River Delta since 2015, citing wealth, credit cards and fintech as key growth areas. Standard Chartered also aims for business growth in the region. OCBC's goal is to achieve S$1 billion profit through trade and wealth flows in the area by 2023. CCB actively develops mortgage and leasing business while BOC launched new fund-transfer and loan products for the region's residents.
Capital movement, regulations top financials' hurdles
Cross-border capital movement and regulatory alignment are the key hurdles for Greater Bay Area-wide financial-services success, according to the HSBC and KPMG survey. Other constraints include different legal and tax systems and separate customs territories. Capital movement within the region may stay limited unless China opens its capital account and abolishes currency controls. More alignment of financial regulations, legal and tax systems could gradually improve the situation, even as Hong Kong and Macau remain special administrative regions.
