The enormity of the Guangdong- Hong Kong-Macau Greater Bay Area project will prove a driving force for China’s economic development, but how will it function effectively? And where will the demand be for legal services? Richard Li reports
There are three top-tier bay areas in the world, namely New York Bay Area, San Francisco Bay Area and Tokyo Bay Area. In future, the Guangdong-Hong Kong-Macau Greater Bay Area of China (GBA) may dwarf them all. The Outline Development Plan for the Greater Bay Area was published by the central government on 18 February this year, marking the transition of the GBA from conceptual to implementation stage.
According to the GBA Plan, the central government is strategically positioning the area as: a world-class vibrant city cluster; an international centre for scientific and technological innovation with global influence; an important support for development of the Belt and Road initiative; a demonstration area for the deep co-operation between mainland China, Hong Kong and Macau; and a habitable, business-friendly and tourist-friendly high-quality living circle.
Development of the GBA is bound to bring about more opportunities for legal service practitioners. “[Target requirements of the Outline Development Plan on] innovation-driven and harmonious development, and the compliance with rigorous trade and investment rules, as well as arrangements under ‘one country, two systems’, bring about potential important service opportunities for domestic and foreign lawyers,” says Guan Jianjun, managing partner of Grandall Law Firm’s Shanghai office.
Milton Cheng, the managing partner of Baker McKenzie’s Hong Kong office, says that as Hong Kong, Shenzhen and other GBA cities transform into a city cluster, cross-border trade and investments can be expected to rise. This will drive up demand for legal services in M&A, banking and finance, project finance, and real estate.
“Capital markets work is likely to remain strong for law firms as Hong Kong fulfils its role as an international financial centre for two-way cross-border capital flows within the GBA,” says Cheng. “With innovation and technology being another major focus of the GBA Development Plan, businesses will be looking to their legal advisers for help to ensure that their IP rights are protected and that any commercial disputes can be resolved efficiently and effectively.”
Ulrike Glueck, managing partner of CMS China’s Shanghai office, says the GBA plan “will promote Chinese enterprises to go global”, and also, “more foreign companies may be attracted to the Greater Bay Area, and there will be more co-operation opportunities between Chinese companies and foreign companies, especially in the fields of infrastructure, modern manufacturing, transportation, modern services, emerging industries, hotel and leisure, insurance, healthcare and education. In legal practice areas, besides general corporate issues, intellectual property, tax, dispute resolution and maritime law may become especially important.”
Yash Rana, chair of Goodwin Procter’s Hong Kong office, says the GBA initiative is expected to create opportunities for existing and new fund managers. “[It] will generate fundraising opportunities for private equity and venture capital,” he says. “It also presents investment opportunities in the high-tech and biotechnology industries.”
However, it will be difficult to complete the integrated development of the GBA at one stroke. “Since Guangdong, Hong Kong and Macau have different law systems and significantly different rules of law, co-ordination and unification are required in terms of capital flow, personnel flow, sharing and joint development of infrastructures, legal supThere should be a uniform and ervision, etc., and sound judicial collaboration and law application mechanisms should be established,” says Guan, from Grandall.
Cheng, from Baker McKenzie, says the GBA is unprecedented in nature – linking cities with different administrations, legal and economic systems, and currencies; careful planning and co-ordination are needed. “In many ways, the GBA is likely to be a test bed for new models of joint co-operation before they are rolled out more widely,” he says. “Therefore, I will not be at all surprised to see new initiatives and policies being rolled out phase by phase, shaped by market demands.”
Benny Xu, a partner at Zhenghan Law Firm in Shanghai, says the Guangdong-Hong Kong-Macau Greater Bay Area essentially represents a systematization of a regional economy, and the realization of economic integration mainly lies in the promotion of a free or orderly flow and integration among various elements including human, capital, goods and
“At present, there are high-quality human resources, as well as efficient and complete service and logistics systems sufficient to support the real economy, in mainland China,” says Xu, “While Hong Kong and Macau, as open windows, have overseas resources including capital, technologies and experience, so the key is how to combine and meet the needs of each other.”
For example, Shenzhen’s Qianhai Free Trade Zone has been a leader in cross-border management of renminbi and other currencies. Xu believes that further improving the convenience in the flow of such elements may be a core issue that needs to be considered in the integrated development of the GBA. He says that while providing convenience, policy makers also need to “identify the overall risk exposure, control systematic risks, and avoid direct impact and transmission of risks from other regions, based on macro-prudential principles”.
With regard to innovative initiatives in the financial field, the Outline Development Plan points out: “Banking institutions in the GBA may launch, in accordance with relevant regulations, cross-boundary renminbi interbank lending, renminbi foreign exchange spot and forward businesses, renminbi-related derivative products, and cross-sale and agency services for the sale of wealth management products.
“Enterprises in the GBA may issue cross-boundary renminbi bonds in accordance with relevant regulations. Efforts shall be made to widen the room for cross-boundary investment by Hong Kong and mainland residents and organizations, and steadily expand the channels for mainland and Hong Kong residents to invest in financial products in mainland and Hong Kong markets.”
Guo Li, a partner at DeHeng Law Offices in Shenzhen, says “Financial innovations, especially those between Hong Kong, Macau and other GBA cities, will step up demand for cross-border investment and financing and other non-litigation services, and there will be new ‘finance +’ models including finance + manufacturing, finance + science and technology, and finance + urban renewal.”
Xu, from Zhenghan Law Firm, says control and management of cross-border capital flows will be an issue to watch. “In terms of control of cross-border capital flows, properly loosening the control and restriction of cross-border foreign exchange flows under capital account may be involved, such as exchange settlement and use of funds, which are permitted to be invested in markets, management of foreign debts, management of cross-border provision of financing, and cross-border guarantee,” he says. “However, at present, cross-border renminbi businesses are more focused on commodity or service trade under current account, and their progress under capital account remains to be seen.”
Intellectual property rights
An effective intellectual property (IP) protection system is vital for the development of the GBA. “Building an international centre for scientific and technological innovation is the priority among priorities in the construction of the GBA,” says Xie Guanbin, a senior partner at Lifang & Partners in Beijing. “When optimizing the innovation environment and strengthening the transformation of scientific and technological achievements, IP rights protection and exploitation will play a promotion and protection role, and there will also be a significant increase in related patent, trademark, copyright application and consultation, and dispute resolution business opportunities.”
Zhang Ping, a partner at JunHe in Guangzhou, says: “The strategic goal of building an international centre for scientific and technological innovation with global influence in the GBA necessarily requires strengthening the protection and exploitation of IP rights.” Section 3, titled Optimization of Regional Innovation Environment, in chapter 4 of the GBA Plan, points out that efforts will be made to comprehensively enhance IP rights protection in the GBA, including: enhancing IP administrative law enforcement and judicial protection; reinforcing IP law enforcement for e-commerce, import and export and other key fields and processes; intensifying the international co-operation in IP creation, exploitation, protection and transaction; establishing and improving mechanisms for cross-border collaboration in IP cases; carrying out IP transactions; and continuously developing and improving IP protection systems that are conducive to encouraging innovation. “These initiatives will bring about unlimited market space for IP lawyers in the GBA,” says Zhang.
Huang Yongjie, a patent attorney at CCPIT Patent and Trademark Law Office in Beijing, says the potential development opportunities to which they need to pay attention in the GBA include: securitization of IP rights; cross-border collaboration in IP cases; IP transactions; handling IP disputes through non-litigation methods such as arbitration, mediation and negotiation; and IP information services.
“Many of these have been hot topics attracting significant attention from IP circles in the Guangdong-Hong Kong-Macau Greater Bay Area,” he says. “For example, IP transactions are among the highest in China both in terms of quantity and amount. Securitization of IP rights has caught extensive attention and has been widely discussed, while IP arbitration and mediation have caught the attention of the [central] government and have continuously developed in practice.”
Huang says government departments should actively promote the implementation of the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region, signed on 18 January this year, in order to expand the scope of reciprocal recognition and enforcement of judgments in civil and commercial matters, as well as IP matters, between both regions as far as possible, thus minimizing multiple proceedings.
Yun Dahui, a partner at Hylands Law Firm in Beijing, says the government should pay attention to “the contradiction between the integrated development of the GBA and the regional protection of IP rights”, and think about how to realize “the cross-border free flow of IP elements and cross-border collaboration in IP protection”.
“It is suggested that a supplementary agreement on IPR protection be signed under the framework of the CEPA [the Closer Economic Partnership Agreement],” says Yun. “Based on integrating existing resources and taking into account existing co-ordination mechanisms, detailed arrangements should be made for IP protection in the GBA.”
Yun says that a linkage mechanism for IP protection should be established within the GBA to strengthen cross-border law enforcement collaboration, co-operation in special matters, joint actions, information exchange and resource sharing. She also suggests that, “under the overall planning of the central government, efforts should be made to jointly establish overseas rights protection agencies to strengthen overseas rights protection … meanwhile, efforts should be made to establish a criminal justice co-operation mechanism in the field of IP rights to jointly crack down on infringements.”
Economic integration cannot be achieved without the support of infrastructure. There are many statements in the Outline Development Plan in relation to “public infrastructure, smart cities, industrial park upgrading and ecological protection”. Guo, from DeHeng, says these statements inevitably relate to legal affairs including public-private partnership (PPP) operation in infrastructure construction, legal services for infrastructure construction bidding, legal due diligence for significant infrastructure projects, and disputes over infrastructure construction contracts.
“Meanwhile, relevant new concepts mean the creation of a new urban development model,” he says. “Corresponding legal service supports are required for changes including initiatives ranging from ‘beautiful China’, smart cities and industrial park upgrades to establishment of enclave co-operation zones, and ecological control lines to green development demonstration zones.”
Huang Yuanbing, director at Tahota Law Firm’s Shenzhen office, says that with the construction of transportation infrastructure, transaction framework designs, investment and financing, bidding and procurement, tax planning, environmental protection reviews, operation and withdrawal, insurance, dispute resolution and other matters in relation to construction projects will all stimulate great demand for professional legal services.
Huang Yuanbing also sees business opportunities in maritime affairs. “There will be a huge market demand for high-end maritime legal services in the GBA, such as ship management, leasing and financing, maritime insurance, maritime law and dispute resolution,” he says. “There is a huge legal service market in terms of customs and trade compliance due diligence, customs inspection, anti-smuggling investigation, customs administrative review cases, and tariff and customs business planning for import and export enterprises etc., in the GBA.”
In the field of data and network security, he adds: “At present, there are few lawyers specializing in data and network security in China, while the economic development of the GBA has placed higher requirements on lawyers’ professional competence. In the business segment, leading law firms and lawyer teams will benefit more.”
Zhang, from JunHe, says, “In the field of dispute resolution, especially cross-border litigation and arbitration, business opportunities for lawyers in the GBA will also be worthy of attention.” The GBA Plan specifies that efforts will be made to enhance the co-operation in legal affairs between Guangdong, Hong Kong and Macau, including the construction of a diversified dispute resolution mechanism for linking with Hong Kong to build an international legal service centre and an international commercial dispute resolution centre.
Zhang says that Shenzhen Intermediate People’s Court has proposed efforts “to improve the trial mechanism for foreign-related and Hong Kong, Macau and Taiwan-related commercial matters, accurately understand market access criteria, and create an open and convenient trade and investment environment”. He adds that Guangdong Higher People’s Court has also proposed efforts to actively explore and establish a centre for settling free trade area and GBA-related disputes.
The Outline Development Plan says that, “the joint establishment of professional service organizations between Guangdong, Hong Kong and Macau is encouraged”, which of course includes the legal service industry.
“The joint operation of law firms is a good idea, which can help effectively utilize and integrate the business advantages and brand effects of law firms in Guangdong, Hong Kong and Macau, promote the exchange and mutual learning between lawyers from different jurisdictions and with different cultural backgrounds, expand the business scope and improve the service quality,” says Xie, from Lifang & Partners. However, he also points out that, “from an operational point of view, exploration and adjustment need to be carried out in practice for matters including the positioning, management structure, benefit distribution and even the dispatch of lawyers in joint operation of law firms”.
Due to the existence of the Hong Kong and Macau Special Administrative Regions, the successful implementation of key measures in the GBA plan inevitably require innovation at the legislative level.
Huang Yuanbing, from Tahota, points out that with regard to the construction and development of GBA city clusters, the central government should give priority to handling the following seven basic legal issues: (1) local legislation and collaboration mechanisms; (2) judicial collaboration and legal application mechanisms; (3) legal system-based collaboration mechanisms for co-construction and sharing of infrastructure; (4) legal system-based mechanisms for resource utilization and ecological protection; (5) legal issues concerning the scope of power of central and local governments, and the relationships between Guangdong, Hong Kong and Macau; (6) legal issues concerning an “enclave economy”, namely leased land under jurisdiction in special zones; and (7) issues concerning the application of private international laws and laws of the GBA.
Lu Yuefeng, director of Dentons’ Guangzhou office, says one enormous challenge will be constructing the legislative and judicial collaboration mechanism for the GBA.
“The Guangdong-Hong Kong-Macau Greater Bay Area includes nine cities with local legislative power, and two special administrative regions, namely Hong Kong and Macau, and involves two major legal systems and three different customs territories and jurisdictions – so there are obvious inter-regional conflicts of law between Guangdong, Hong Kong and Macau,” he says.
“There should be a uniform and commonly recognized rule system in the GBA in many aspects including talent flow, market access and market supervision, so as to promote the flow of production factors and form a normative order.”
With the anticipated rapid economic development of the GBA, there will inevitably be an increase in disputes. Lu points out that in order to reduce dispute resolution costs and enhance the predictability of results, it is necessary to strengthen judicial collaboration, “including cross-border service of process, investigation and evidence collection, reciprocal recognition and enforcement of effective civil and commercial judgments, rulings and arbitration awards in civil and commercial matters, and the establishment of diversified dispute resolution mechanisms.”
Zhang, from JunHe, points out that since Guangdong, Hong Kong and Macau are three different jurisdictions but belong to the same sovereign state, “it is inappropriate to invoke private international laws to resolve conflicts of laws between Guangdong, Hong Kong and Macau”.
Zhang says that in order to promote the construction of the GBA, it is necessary to properly co-ordinate and deal with the conflicts of laws in terms of civil and commercial affairs, economic and social management, etc., under the different legal systems of the three regions, and to build a unified legal framework for co-operation in the GBA. “Therefore, government departments should give priority to promoting the legislation and the establishment of mechanisms for law co-ordination in all fields in the GBA, by making full use of preferential policies under the GBA Plan and with innovative courage and ideas.”