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Interesting Opportunities Lie Ahead for M&A Dealmakers in China's Greater Bay Area

There has been a renewed focus in the financial services sector of China’s Greater Bay Area as recent policy changes are set to boost cross-border capital flows in the region.

China Greater Bay Area Intralinks

With more than 70 million people across 11 cities, China’s Greater Bay Area (GBA) includes both China’s special administration regions Hong Kong and Macau as well as the most developed cities in mainland China such as Shenzhen and Guangzhou. This region alone generates a gross GDP per capita of USD 1.7 trillion, a figure equivalent in size to entire countries such as Canada and South Korea.

A turn of events in Q2 2020 led to new opportunities when Chinese regulators issued new opinions concerning financial support to promote trade and investment in the Guangdong-Hong Kong-Macao Greater Bay Area.

On May 14, 2020, the People’s Bank of China (PBOC), China Banking and Insurance Regulatory Commission (CBIRC), China Securities Regulatory Commission (CSRC) and State Administration of Foreign Exchange (SAFE) jointly issued Opinions on Providing Financial Support for the Development of the Guangdong-Hong Kong-Macao Greater Bay Area. A series of 26 new measures, its purpose is to support the development of interconnectivity between cities and financial market openness within the GBA.

Bain & Company released a report earlier this year, Are You Ready for the Financial Services Opportunities of China’s Greater Bay Area?, which referenced the boom of wealth management, insurance and lending businesses in the GBA.

The recent policy changes and developments in the GBA are a great step forward in integrating the mainland Chinese financial market with Hong Kong’s long-established and mature infrastructure. Further guidelines and policies are expected to be rolled out to better facilitate innovation, collaboration and boost cross-border capital flows in the GBA.

Digital infrastructure to support this new economic space

Among the sectors highlighted in the Bain & Company research paper, insurance, wealth management and lending are seeing a trend toward more cross-border opportunities in the GBA. In this age of COVID-19, it is vital to integrate technology to support rapid economic development and unlock untapped opportunities.

Sixty percent of mainland respondents to Bain & Company’s survey consider “digital” the best channel when making purchasing and trading decisions in the wealth management product category. The high expectation and preference toward a well-function digital platform also apply to the cross-boundary lending business.

Mark Saunders, group executive, chief strategy and corporate development officer of AIA Group told Bain, “Mainland customers are sophisticated consumers of digital experiences and have high expectations; this translates into a tendency of relying more on innovative digital platform, and efficient virtual communication channel for insurance policy issuers in the GBA.”

This opportunity for cross-border M&A requires a more seamless, safe and secure exchange of sensitive information, especially given the emerging cross-border market. New entrants to the market are also pushing for the automation of tasks on deal platforms. For more traditional firms which have yet to digitize, now is the time to put technology to work, rather than watch others march over the horizon.

Celia Lo