Can Deploying Blockchain in the Greater Bay Area Help Ease Friction Points?
China’s Greater Bay Area initiative, the Pearl River Delta region plus Hong Kong and Macau, has the potential to create one of the world’s most economically powerful regions. Blockchain technology has been mooted as playing a role in helping smooth over some of the friction points involved in bringing the two special administrative regions into the cluster.
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The Greater Bay Area–a Cluster With Enormous Promise
The Greater Bay Area, an eleven-city area in the south of China, already boasts a gross domestic product (GDP) of $1.34 trillion USD. It is home to 68 million residents, a number of global technology companies, and, courtesy of the production technology activities of Dongguan, manufactures one in every five smartphones in the world.
As Ben Simpfendorfer, founder of Hong Kong-based consulting firm Silk Road Associates points out:
“…today the Greater Bay Area is the world’s largest hardware supply chain for everything ranging from smartphones to IoT devices. There’s good reason why Airbus recently created an accelerator program with the Shenzhen-based HAX hardware accelerator.”
Harnessing the Resources Remains a Challenge
While the cluster is currently an informal region defined by geography, the goal of the GBA initiative is to integrate Hong Kong and Macau and formalize a regulatory framework that will help form an economic cluster rivalling New York or the larger Tokyo-Yokohama region.
Doing so will not be without its challenges, especially in light of the increasingly tentative attitude of Hong Kong’s residents to mainland encroachment on the city’s autonomy. While some synergies are obvious–such as allowing companies to base themselves in Hong Kong and gain access to the Chinese marketplace–there are complications, such as income tax rate differentials.
The Potential For Blockchain Technology to Reduce Risks
CPA Australia’s Greater Bay Area Innovation and Technology Committee cited easier cross-border payments as one of the key issues that needs to be addressed in order for the GBA initiative to succeed. 61 percent of the Hong Kong-based committee identified cross-border payments as the most “critical factor” to be resolved for the project to fulfill its promise, proposing blockchain-based solutions as a potential panacea.
Fraud is one particular problem identified by the committee as having the potential to derail the ambitions for the region and the capacity to be prevented by DLT. Fraud in business is exceptionally common in mainland China, but per the committee’s Allen Wong on the potential for blockchain to mitigate that risk:
“In the past, they might go to several banks, get a lot of money with one purchase order and then take off. With blockchain, once the information is stored in the blockchain the second bank can check and see the PO already has money granted. It increases security from a fraud perspective.”
The committee also identified provenance as another area of application for the new tech. Hong Kong is no stranger to deploying blockchain solutions to resolve problems. The Hong Kong Monetary Authority announced plans in mid-2018 to create a trading platform to foster growth among SMEs, using blockchain technology. Per Gavan Ord, policy adviser to CPA Australia:
“[The HKMA] is building up some local expertise on using blockchain to support trade financing. The next step is for it to commence discussions with its cross-border peers about taking this blockchain platform into different jurisdictions.”
Blockchain technology could well be the answer to managing cross-border payments and e-invoices across the three jurisdictions that would span the Greater Bay Area. If so, the negative connotations that still permeate whenever the “Pearl River Delta” region is mentioned–dirty industry, cheap labor–may dissipate as the nine-city cluster adds Macau and Hong Kong to it.
Have your say. Is blockchain technology the solution, or a solution, to some of the problems facing integrating three jurisdictions into one commercial and technological hub?
Images via Pixabay