The economic integration between Hong Kong and Shenzhen has become a heated topic for the media and commentators as forums were held and reports were released in August and September.

 

At the same time, the people of Hong Kong, especially the business community, were paying extra attention to another issue - how the processing industry owned by Hong Kong people in the Pearl River Delta area in Guangdong Province would cope with the new policy on restricting the processing trade announced by the Ministry of Commerce on July 23.

 

These two issues seem unrelated. The discussion on economic integration of Hong Kong and Shenzhen is about the future development of the two regions. The new trade policy concerns the huge investment by Hong Kong businesses in the Pearl River Delta area in the past decades. There has not been any publication so far that associates the two.

 

But a further analysis shows that the two are quite related.

 

Had there not been the large-scale migration of the manufacturing industry from Hong Kong to the Pearl River area, the topic of economic integration of Hong Kong and Shenzhen would not have arisen today. The "front shop, back factory" industrial division pattern between Hong Kong and the Pearl River Delta areas that was formed during the 1980s and 1990s is just sectoral integration from the viewpoint of regional economic integration.

 

Market forces have closely connected the two regions, and the economic fate of Hong Kong with that of the whole country. Thus the economic integration of Hong Kong and the mainland, especially the Pearl River Delta area in Guangdong, has become an irreversible and irresistible trend.

 

Now Hong Kong-based manufacturers who have their processing factories in Guangdong have to seek business opportunities in inland areas, which shows the reliance of Hong Kong's economy on the national economy is developing to a deeper and broader level. This, in essence, also coincides with Hong Kong's expanding economic integration with Shenzhen.

 

The connection between Hong Kong and Guangdong through the past decades means that Hong Kong must link itself more closely with the mainland.

 

To enable Hong Kong to share the country's economic development opportunities as early as possible, economic integration between Hong Kong and Shenzhen should precede.

 

Regional economic integration in the international arena always faces various difficulties and problems. Under the current institutional system of "one country, two systems", the economic integration between Hong Kong and the mainland is like an international regional economic integration in various aspects, and therefore, will face difficulties and complications as well.

 

Geographically, Shenzhen is connected to Hong Kong and is close to Hong Kong in economic and social development levels. It has always taken the lead in the country's reform and opening up. Thus it will face relatively fewer difficulties and obstacles in developing integration between the two first. Such integration will benefit Hong Kong, Shenzhen, as well as the whole country.

 

It would be a short-sighted view to ignore or oppose economic integration between Hong Kong and Shenzhen just because Hong Kong businesspeople and their processing factories in the Pearl River Delta area may have to move further away from Shenzhen.

 

Both Hong Kong and Shenzhen should consider economic integration from the viewpoint of whether it can benefit their development. There should not be any zero sum game introduced to the integration process. At the same time, both Hong Kong and Shenzhen should consider the integration from the viewpoint of whether it will benefit both sides.

 

The central government has played a coordinating role in the economic integration between Hong Kong and Shenzhen as well as the Guangdong Province. This is the special advantage that regional economic integration in the international arena does not have.

 

The central government has granted special favors to the Hong Kong Special Administrative Region. Take the list of processed goods subject to export limits published on July 23 for example. Under the new policy, enterprises are required to have guarantee deposits in the Bank of China while registering their trade contracts of enlisted products. This did increase the capital burden of related Hong Kong-based businesses. But the use of the letter of guarantee allowed in the paying methods published on September 5 is really a move to ease the burden of Hong Kong businesses.

 

So the Hong Kong community is taking an open and positive attitude toward its economic integration with the mainland, and economic integration with Shenzhen first.

 

(China Daily October 18, 2007)