Guangdong–Hong Kong–Macao Cooperation: Historical Process and Driving Mechanisms

Abstract

Cooperation in the Guangdong–Hong Kong–Macao Greater Bay Area under the “one country, two systems” framework is different from regional cooperation in other areas. Its unique cross-border cooperation within one country has attracted much attention from the academic community. Since the 1980s, the cooperation between Guangdong, Hong Kong and Macao has gone through different stages with China’s development. Examining the process of change can contribute to understanding the logic and driving mechanisms of cooperation in the Greater Bay Area. This study shows that regional cooperation has been driven from the market to the combined influence of the market and government since the 1980s. During this transition, the central government has become increasingly involved in the cooperation through political embedding, eventually becoming the main driver of this regional cooperation. However, regardless of whether the driving force was the market or the government, significant internal tensions remained throughout the transition process. The research suggests that the top-level design for institutionalising regional cooperation can effectively balance market and administrative forces, leveraging the strengths of each. It is valuable to elucidate the uniqueness and complexity of Guangdong–Hong Kong–Macao cooperation under “one country, two systems”, which will contribute to further promoting deep cooperation in the Greater Bay Area.

1. Introduction

The Guangdong–Hong Kong–Macao Greater Bay Area is one of the most important development regions in China and is different from other regions in that it is a cross-border regional cooperation under “one country, two systems”. The region is under “one country, two systems, three customs zones and three legal systems”. The Chinese government attaches great importance to the cooperation and development of the region and has issued a number of central government documents to promote the cooperation and development of the Greater Bay Area. What is the historical process of regional cooperation? Why did the central government intervene in the cooperation of the Greater Bay Area? A review of the historical development of cooperation in the Greater Bay Area will help us understand the logic of cooperation and development and will also provide lessons for cooperation and development in other regions.

Despite the cross-border problems, Guangdong, Hong Kong and Macao share a common culture, and there has always been cooperation among the three places, especially after China’s reform and opening up. In the 1980s and 1990s, Guangdong, Hong Kong and Macao spontaneously formed a “shop in Hong Kong (Macao), factory in Guangdong” mode of cooperation (Yang 2006a). However, with the rapid economic development of Guangdong, whose GDP has surpassed that of Hong Kong, this traditional mode gradually failed to meet the needs of regional cooperation. Cooperation promoted by local governments began to take the stage, and the signing of the Closer Economic Partnership Arrangement (CEPA) in 2003 was an important symbol. In 2015, the central government upgraded the regional scale of Guangdong, Hong Kong and Macao to the national scale by reorganising the scale network (Xu et al. 2019) and established the “Guangdong–Hong Kong–Macao Greater Bay Area”. This national strategic embedding approach aims to overcome the institutional differences among Guangdong, Hong Kong and Macao through institutional innovation by combining top–down top-level design with bottom–up local exploration.

There are abundant discussions on regional cooperation, which have mainly focused upon two types of regions. One is supranational regional cooperation, such as the European Union (EU), the North American Free Trade Area (NAFTA), the Association of Southeast Asian Nations (ASEAN), etc., which mainly focuses on cross-border cooperation (Basboga 2020; Beck 2022), regional integration (Chia and Plummer 2015; Schimmelfennig 2021) and trade and economic cooperation (Gough and Venkataramany 2006; Zepeda 2021). The other is regional cooperation within countries, such as the San Francisco Bay Area (SFBA), the Tokyo Bay Area (TBA), the New York Bay Area (NYBA), etc., which mainly focuses on cross-jurisdiction governance issues (Yang and Lin 2020). The above studies provide theoretical frameworks and empirical knowledge for us to understand the logic of cooperation and development in the Greater Bay Area. However, under the context of “one country, two systems”, the governance system, governance mechanism and political mutual trust in the Greater Bay Area are quite different from those in other regions (Yang et al. 2022), which determines that the study of cooperation in the Greater Bay Area needs to be discussed in the context of the current political, economic and social characteristics of China.

Since the reform and opening up, the Chinese government has attempted to gain development advantages by means of scale reconfiguration, and the planning of urban agglomerations has become an important development strategy for various regions, such as the Pearl River Delta, the Yangtze River Delta and the Beijing–Tianjin–Hebei Economic Zone (Yu 2021). In recent years, some scholars have conducted in-depth studies on regional cooperation among Chinese cities, accumulating “local knowledge” (Kincheloe and Semali 1999) for the study of cooperation in the Greater Bay Area. Additionally, there is a characteristic asymmetry in administrative status among the entities within the Guangdong–Hong Kong–Macao region. Although Hong Kong, Macao and Guangdong are at the same administrative level within China’s administrative system, Hong Kong and Macao, as Special Administrative Regions, enjoy a high degree of autonomy and possess greater discourse power and political resources in their collaboration with Guangdong (Yang et al. 2022). Cooperation between neighbouring cities, such as Hong Kong and Shenzhen and Macao and Zhuhai, exists between two different levels of government (Yin 2020). Consequently, this asymmetry in administrative status makes equal cooperation among different sides challenging, rendering Guangdong–Hong Kong–Macao cooperation more complex than other examples of regional cooperation in China (Yang and Li 2013).

In summary, the unique characteristics of regional cooperation in the Guangdong–Hong Kong–Macao area dictate that it cannot simply replicate the experiences and models of other regional collaborations; hence, it necessitates independent research. This study aims to systematically review the historical development of regional cooperation in Guangdong–Hong Kong–Macao since the 1980s and to analyse the driving mechanisms and internal tensions at each stage in depth. Through comprehensive research, we seek to unveil the complexities and peculiarities of cooperation in the region, clarify the inherent logic of Guangdong–Hong Kong–Macao cooperation and provide insights for better balancing of the relationship between market forces and administrative control. Additionally, this research offers valuable references for studying and practicing regional cooperation where institutional differences exist.

A review of the relevant literature reveals that regional cooperation among Guangdong, Hong Kong and Macao is a dynamic process with a long time span and involving policy changes and interactions among multiple actors. This determines the necessity to discuss Guangdong–Hong Kong–Macao cooperation in a longer time dimension and to systematically sort out the policy changes and modes of cooperation at various stages of Guangdong–Hong Kong–Macao cooperation, with a view to revealing the dynamic mechanism of Guangdong–Hong Kong–Macao cooperation. In view of this, the application of historical analysis in this study can better achieve the above research objectives. Historical analysis integrates the time dimension into the study, which is a method of conducting “longitudinal research” (Neuman 2014) on events, people or social relations within a time span. This study takes the period from the 1980s to the present as the timeframe of the study and analyses the relevant policy documents and historical data in an attempt to sort out the historical process of Guangdong–Hong Kong–Macao cooperation and to explain the driving mechanism behind the cooperation.

2. Market-Driven Regional Cooperation

In the early 1980s, with mainland China possessing a vast market, cheap labour and abundant land resources, Hong Kong and Macao possessed advantages in terms of institutions, capital, talents, management and international markets. Entrepreneurs in Guangdong, Hong Kong and Macao were keenly aware of the huge market opportunities that could be brought about by complementary strengths in the region. The expectation of win–win cooperation also drove all stakeholders to break away from the confines of their local interests and form city clusters spontaneously for their own greater benefits (Feng 2014). This market-driven functional integration model is a foundational element of regional cooperation (Zhang 2018), which is mainly reflected in both investment and trade relations.

In terms of investment relations, Guangdong Province made full use of the policy advantage of being the frontier of reform and opening up and the establishment of special economic zones by the central government, the geographical advantage of being adjacent to Hong Kong and Macao and the advantage of a long history of kinship, attracting a large number of Hong Kong and Macao businessmen’s investments. Hong Kong businessmen were the largest in number and the most active. In the 1960s, Hong Kong seized the opportunity of the second great resource-intensive industrial transfer from Japan to developing countries or regions, and achieved economic take-off in a short period, accumulating huge amounts of capital and advanced technology, and became one of the “Four Little Dragons of Asia”. In the 1970s and 1980s, as land and labour costs rose sharply, Hong Kong’s growth model, which relied on traditional resource-intensive industries, encountered an obvious bottleneck, and Hong Kong urgently needed to break through economic transformation (Zhao and Gu 2018).

The relocation of Hong Kong’s resource-intensive manufacturing industries is an important transformation initiative, and Guangdong has become the optimal choice for the relocation of Hong Kong’s industries. Due to the large influx of rural labour and the revitalisation of land resources in the early period of reform and opening up, Guangdong fully met the basic conditions required for Hong Kong’s relocation of the manufacturing industry. Between the 1980s and the 1990s, Hong Kong’s manufacturing industry (mainly textile and apparel industry) experienced a sharp decrease in the proportion of the GDP, dropping from about 9 per cent of the GDP in 1984 to about 1 per cent in 1999 (Zhao and Gu 2018) (Figure 1), indicating a large-scale outward shift of Hong Kong’s manufacturing sector.

Figure 1. The proportion of the textile and clothing industry in Hong Kong’s GDP from the 1980s to the 1990s. Source: Zhao and Gu (2018). Economic breakthrough: where is the way out?—from the rise and fall of Asia’s “four little dragons” to see the direction of China’s transformation. Changjiang Securities Research Institute. https://pdf.dfcfw.com/pdf/H3_AP201809191198138633_1.pdf (accessed on 5 February 2024).

The Pearl River Delta (PRD) region in Guangdong Province has taken over 80% of Hong Kong’s manufacturing transfer (Greater Pearl River Delta Business Council and Pearl River Delta Western Development Task Force 2006). The PRD not only provides cheap land and labour for the transfer of Hong Kong’s manufacturing industry, but also undertook the production and assembly of products in the industrial chain, playing the function of a “factory”. Hong Kong, on the other hand, provides it with a steady flow of capital and is responsible for the sales and export links in the industrial chain, playing the function of a “shop”, gradually forming a mode of division of labour and cooperation of “a shop in Hong Kong and a factory in Guangdong”. According to the relevant statistics, for years, Hong Kong has topped the list of foreign direct investment in the mainland of China, mainly concentrated in Guangdong Province (Census and Statistics Department of the Hong Kong Government 2021).

In terms of trade relations, Hong Kong and Macao enterprises have invested heavily in Guangdong’s manufacturing industry, enabling Guangdong’s manufacturing industry, which is endowed with abundant land and human resources but lacks capital, to rapidly increase its production capacity and expand its scale of production, thereby delivering more products to the export trade. In turn, the prosperity of trade further encouraged the flow of capital from Hong Kong and Macao to Guangdong, forming a virtuous circle of investment and trade. According to relevant data, the total import and export volume between Guangdong and Hong Kong and Macao reached USD 102.012 billion in 1997, which is 102 times the total import and export volume of USD 1.001 billion in 1979. Meanwhile, Guangdong’s total export volume to Hong Kong and Macao has always accounted for more than 80 per cent of the total export volume of Guangdong, and imports from Hong Kong and Macao have always accounted for more than 70 per cent of the total import volume of Guangdong (Meng and Lei 2003).

Investment and trade activities based on complementary advantages and mutual benefits, mainly carried out by enterprises on their own initiative, have become the “glue” that promotes cooperation among Guangdong, Hong Kong and Macao. At this stage, the central government attempted to rely on market forces to strengthen economic ties among Guangdong, Hong Kong and Macao, with a view to bridging political and social gaps (Hao and Duan 2021). However, market forces alone have proven to be unable to achieve effective regional integration, as they usually tend to increase differences rather than reduce them (Krugman 1992; Alesina and Spolaore 2005). In around 2000, the Guangdong provincial government adjusted the existing industrial structure through policies, i.e., transferring from light industry to heavy industry, and vigorously developing high-tech industries and modern service industries. The industrial restructuring of Guangdong Province had a great impact on the traditional cooperation mode of “shop in Hong Kong/Macao and factory in Guangdong (前店后厂 qiandian houchang)”. On the one hand, Guangdong Province planned to reduce the proportion of the manufacturing industry in its industrial structure; however, the manufacturing industry was precisely the area in which Hong Kong and Macao made the largest investment in Guangdong Province. The restructuring of Guangdong Province’s industrial structure would inevitably affect the return on Hong Kong and Macao’s initial investment. On the other hand, the development of high-tech industries and modern service industries in Guangdong Province would positively impact Hong Kong’s high-tech industries and modern service industries, resulting in gradual and intense competition between Guangdong Province and Hong Kong (Zhang 2018). Macao has always had a mono-industrial structure, with the gaming industry as its pillar industry. As the gaming industry is illegal in the mainland, Macao was unable to make use of its advantageous industries to carry out regional cooperation with Guangdong (Yang and Lin 2020). Guangdong has transitioned gradually from processing trade towards an independent modern industrial system, coupled with China’s successful accession to the WTO in 2001 and the subsequent implementation of the “going global” strategy, which have enabled the mainland to gradually shift away from its inward development model reliant on foreign direct investment (Derudder et al. 2018). As a result, Guangdong Province has gradually developed integrated manufacturing and retail capabilities, leading to a gradual decrease in its dependence on Hong Kong and Macao for retail functions. Hong Kong and Macao are no longer the main drivers of Guangdong’s economic growth, and the “Hong Kong factor” in particular is fading in Guangdong (Feng 2014).

The world’s three major bay areas (San Francisco Bay Area, Tokyo Bay Area and New York Bay Area) almost all show the importance of the inter-city division of labour and a complementary cooperation network; in particular, regarding the characteristic of a “single core”, the three bay areas, respectively, have the city of San Francisco, the city of Tokyo and the city of New York as their own cores. A core city has the advantage of resource aggregation, while the surrounding cities, according to resource endowment, and the core city form a “single-core” bay area with good complementarity and a high degree of stability. Unlike the three bay areas, the Greater Bay Area presents a “multi-core” pattern, with the three core cities of Hong Kong, Shenzhen and Guangzhou “advancing together” in terms of economic strength and influence. All of them have a strong desire to become the ecological centre or “leader” of the region, thus triggering fierce competition within the region. The relationship between Hong Kong, Shenzhen and Guangzhou and their respective positions in the region has changed significantly since the reform and opening up (Yang 2006b). As Guangdong Province relied on the favourable policies of reform and opening up and the special economic zones, its economy developed rapidly, while Hong Kong’s economy entered a period of weak growth after being hit by Asian financial turmoil in 1997, causing the gap between Guangdong’s GDP and Hong Kong’s to narrow further, with Guangdong’s starting to overtake Hong Kong’s in 2001 (e.g., Figure 2).

Figure 2. Comparison of GDP growth between Guangdong and Hong Kong. Source: Guangdong Provincial Bureau of Statistics (2016), 2016 Guangdong statistical yearbook. http://tjnj.gdstats.gov.cn:8080/tjnj/2016/ (accessed on 5 February 2024); Census and Statistics Department of the Hong Kong Government (2021). Hong Kong foreign direct investment statistics (1979–2021). https://www.censtatd.gov.hk/tc/EIndexbySubject.html?scode=260&pcode=B104000 (accessed on 5 February 2024).

Under the situation of fierce competition within the region, Hong Kong’s role has changed greatly, and its discourse power has been gradually lost, which triggered concern in Hong Kong’s society about its marginalisation, and their mentality has gradually changed from cooperation to competition (Yu 2021). With the change in Hong Kong’s role and mentality, the phenomenon of negative integration and positive confrontation arose in Hong Kong over regional cooperation (Yang et al. 2022; Lui 2015). For this reason, Guangdong–Hong Kong–Macao cooperation has shown the market’s limitation, which provides legitimacy for the central government’s in-depth involvement in Guangdong–Hong Kong–Macao cooperation affairs.

3. Regional Cooperation Co-Promoted by Market and Local Governments

In order to address the negative impacts of market-driven regional cooperation, mainland China signed the Closer Economic Partnership Arrangement (CEPA) with Hong Kong and Macao in 2003. It is widely recognised that the signing of the CEPA marked a shift from market-led non-institutionalised cooperation among Guangdong, Hong Kong and Macao to market- and government-led institutionalised cooperation (Yu 2021; So 2011) and enabled the central government to more directly coordinate pioneering interventions in cross-border economic integration (Yang 2004). Although the government played a more active role in Guangdong–Hong Kong–Macao cooperation than in the past, the market mechanism was still the main driving force of regional cooperation at this stage in terms of the relevant policies to promote cooperation, which were mainly in the form of agreements. Agreements are typical commercial instruments that are voluntary and reciprocal in nature. It can be seen that the central government still regards the market mechanism as the leading force in promoting Guangdong–Hong Kong–Macao cooperation, while local governments, as agents of the central government, actively assist the market players. This is more obvious in the Pan-Pearl River Delta Regional Cooperation Framework Agreement, which was formulated on the basis of the CEPA. The agreement specifies “market-led” as the main principle of cooperation, while the government plays the role of “creating a favourable environment for development and guiding the direction of regional cooperation”, with the aim of constructing a regional cooperation model of “market operation and government promotion”.

However, in the 10 years since the signing of the CEPA, regional economic cooperation has shown that local governments have actively participated in the cooperation while enterprises as the main cooperation stakeholders lacked substantial participation (Zhang 2018). In addition, after the signing of the CEPA, Guangdong, Hong Kong and Macao have actively implemented the policy of the Individual Visit Scheme for Mainland Residents to Hong Kong and Macao, and the enthusiasm of mainland residents for travelling to Hong Kong and Macao for tourism and shopping has been unleashed, which has led to an unexpected situation, i.e., a large number of mainland tourists have flocked to Hong Kong and Macao, crowding out the resources of local residents and resulting in varying degrees of “reverse cooperation (boycott)” in Hong Kong and Macao, from the government to the citizens. For example, the Hong Kong government has introduced a policy to restrict the purchase of milk powder for mainland residents (Yang and Li 2013); society in Hong Kong has taken an active confrontational stance against mainland women coming to Hong Kong to give birth and the proliferation of “parallel traders” (Liu et al. 2018); and people in Macao have expressed their dissatisfaction with the overabundance of mainland labourers and tourists affecting local work and life (Yu 2021). Three main reasons for the above phenomena exist: first, the failure to identify the combination of the interests of all parties, and the failure to fundamentally remove the obstacles to cooperation at the institutional level through the top-level design (Feng 2014); second, the lack of a clear legal mandate and detailed implementation plan for agreements such as the CEPA, which lacks sufficient binding on the main parties in implementing the cooperation document (Yang et al. 2022); third, the exploration of institutional innovation at the local level has been fruitful, but the top-level design is insufficient, making it difficult for institutional innovation to be elevated from a case-by-case experience to a universal model.

From the above analysis, it is clear that the “market-operated and government-driven” model of regional cooperation has not achieved the expected results. In the absence of market enthusiasm, local governments have taken the initiative themselves, resulting in the phenomenon of superficial prosperity and bustle in regional integration. For example, for a long time, among the three major national planning platforms, namely Hengqin, Nansha and Qianhai, which aim to promote cooperation between Guangdong, Hong Kong and Macao, the proportion of state-owned enterprises in the three platforms was large, while the proportion of Hong Kong and Macao enterprises, which are the main targets of the platform construction, was relatively small.

4. National Strategies Embedded in Advancing Regional Cooperation

In the face of increasingly fierce competition among Guangdong, Hong Kong and Macao and inadequate top-level design, the central government has gradually come to realise that it is difficult to truly promote effective regional cooperation by relying solely on market forces and the autonomous exploration of local policies. However, due to the constraints of the “one country, two systems” system, the central government is unable to replicate the governance of the Yangtze River Delta and the Bohai Rim Economic Circle, which have been deeply involved in urban agglomerations. Therefore, a good interaction model between top-level design and bottom–up local exploration is considered suitable, which is known as “national strategy embedding” (Wen and Lin 2020). At the top-level design, the central government has mainly restructured the national–local-scale relationship through regional planning. The history of regional-scale restructuring in Guangdong, Hong Kong and Macao shows that the region has gone through a number of adjustments and has gradually risen from a local idea to a national strategy. In the 1990s, the region comprising nine cities in the Pearl River Delta (PRD), Hong Kong and Macao was known as the “Greater Pearl River Delta” or the “Circum-PRD”. In 2003, the Pan-Pearl River Delta (PPRD) Region was formed by 11 provincial administrative regions including Guangdong Province, Hong Kong and Macao to promote regional cooperation on a voluntary and reciprocal basis. Concepts such as the “Greater PRD” reflect more local government planning for regional development, emphasising the radiating role of the PRD region, while Hong Kong and Macao have always been outside the scale reorganisation system of Guangdong Province (Xu et al. 2019). Therefore, there is an urgent need to break through the “Pearl River Delta”-based regional planning and incorporate Hong Kong and Macao into a broader regional scale network.

Rescaling is an inherent phenomenon of globalisation (Brenner 1999; Wang and Liu 2017). Studies analysing the connections between cities have shown that many cities are part of a broader globalisation process (Raźniak et al. 2017). Therefore, discussions on scale restructuring in the Guangdong–Hong Kong–Macao region inevitably involve analysing the status and roles of various cities within this region in the global economic network. Globalisation has made physical distance between cities progressively less important, both in terms of capital and labour mobility (Sassen 2016). This is due to the formation of global production networks facilitated by globalisation, wherein different cities assume distinct production and service functions, interconnected through the establishment of branch networks by large multinational corporations on a global scale, thereby rendering cooperation between cities less reliant on physical distance (Raźniak et al. 2021). Additionally, productive service enterprises play a crucial role in the formation of the global city network, further enhancing the connectivity of cities in the global network (Derudder et al. 2018). However, some scholars, through an analysis of the changes in the status of Chinese cities in the global city network, argue that apart from Hong Kong and Macao, the connectivity of mainland Chinese cities has improved, and the relative importance of Hong Kong in assisting China’s integration into the global economy has declined (Derudder et al. 2018). Therefore, against the backdrop of increasingly fierce global competition, mainland Chinese cities, especially core cities in the Guangdong–Hong Kong–Macao region such as Guangzhou and Shenzhen, have continuously increased their influence in the global economic network, while the role of Hong Kong and Macao in facilitating the integration of mainland Chinese cities into the global economic network has gradually weakened. Faced with these issues, the central government needs to reconsider and clarify the roles and functions of Hong Kong and Macao in regional cooperation and endeavour to enhance their attachment to global capital flows through scale restructuring measures, to assist mainland Chinese cities in better integrating into the world and simultaneously promote Hong Kong and Macao’s better integration into the national development agenda.

In 2014, the central government decided to establish the China (Guangdong) Pilot Free Trade Zone (“Guangdong FTZ”), which consists of three parts: Nansha New Area of Guangzhou, Qianhai–Shekou Area of Shenzhen and Hengqin New Area of Zhuhai, which are the hinterland connecting Hong Kong and Macao, as well as demonstration zones and important strategic platforms for deep cooperation between Guangdong, Hong Kong and Macao (Liu and Wu 2023). The Administrative Measures of the China (Guangdong) Pilot Free Trade Zone explicitly mentions that “the Pilot Free Trade Zone will implement deeper opening up to Hong Kong and Macao under the framework of CEPA”. It can be seen that the FTZ is a positive response to the ineffective operation of the locally led CEPA. The central government strategically adjusts the scale of national–regional–city power relations, aiming to form new institutional advantages (Zhang 2013), thereby promoting effective cooperation between Hong Kong, Macao and mainland cities and further enhancing the competitiveness of Hong Kong and Macao in the global economic network. Statistics show that the establishment of the FTZ has had a significant impact on regional cooperation between Guangdong, Hong Kong and Macao. The proportion of the actual utilisation of Hong Kong investment to the total actual utilisation of foreign investment in Guangdong Province rose significantly from 63.8% in 2014 to 76.2% in 2015 (Guangdong Provincial Bureau of Statistics 2016), reflecting the FTZ’s ability to promote investment and trade.

Taking the Guangdong FTZ as the spatial carrier, the central government issued the “Vision and Action for Promoting the Construction of the Silk Road Economic Belt and the 21st Century Maritime Silk Road” in 2015, which formally put forward the concept of the “Guangdong–Hong Kong–Macao Greater Bay Area” and gradually replaced expressions such as the “Greater Pearl River Delta”. In 2017, the Greater Bay Area was incorporated into the Government Work Report of the State Council, signalling its elevation to a national strategic level. The spatial scope of the Greater Bay Area largely overlaps with that of the Pearl River Delta, encompassing Hong Kong, Macao, Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen and Zhaoqing. With a total area of 56,000 square kilometres, a population of approximately 86.3011 million by the end of 2022 and an economic aggregate surpassing USD 19 trillion, it has become one of the most open and economically vibrant regions in China (China Guangdong-Hong Kong-Macao Greater Bay Area Portal 2023). The central government aims to make the Greater PRD a de-localised, more united and globalised concept through the Bay Area concept. The rise from the regional scale to the national scale can weaken the problem of administrative compartmentalisation encountered with regional development (An et al. 2018), and the influence and importance of regional development will thus be significantly enhanced (Wen and Lin 2020). In 2019, the central government issued the Outline of the Plan for the Development of the Guangdong-Hong Kong-Macao Greater Bay Area, which is the first plan promulgated by the central government to straddle “one country, two systems” and includes Guangdong, Hong Kong and Macao. The Outline mentions “Hong Kong” and “Macao” 192 times, giving Hong Kong and Macao sufficient importance that cannot be matched by previous policies. In essence, the plan has prompted the central government to proactively regulate the power of economic, social and spatial development interventions in the Greater Bay Area (Zhang 2013), while clarifying the roles and positioning of each city, which is conducive to the complementary functions and coordinated development of the cities. (Table 1)

Table 1. Types of regional planning for promoting cooperation among Guangdong, Hong Kong and Macao.

Regional Name	Scale Type	Purpose and Goals	Initiating Entity	Coverage	Related Policies
Pan-Pearl River Delta Region	Regional scale	To promote closer cooperation between the mainland and Hong Kong and Macao, enhancing the overall strength and competitiveness of the region.	Guangdong Province	Fujian, Guangdong, Guangxi, Guizhou, Hainan, Hunan, Jiangxi, Sichuan, Yunnan, Hong Kong and Macao	“Pan-Pearl River Delta Regional Cooperation Framework Agreement” (2004)
Greater Pearl River Delta Region	Regional scale	Joint construction by Guangdong, Hong Kong and Macao of a vibrant and sustainable world-class urban agglomeration with global competitiveness.	Central Government	Guangzhou, Foshan, Zhaoqing, Shenzhen, Dongguan, Huizhou, Zhuhai, Zhongshan, Jiangmen, Hong Kong and Macao	“Planning for the Coordinated Development of the Urban Agglomeration in the Pearl River Delta” (2004)
Pearl River Estuary Bay Area	Regional scale	To become the essence of the high-quality living circle jointly built by Guangdong, Hong Kong and Macao; a demonstration area leading the transformation of economic development mode in the Greater Pearl River Delta.	Guangdong Province, Hong Kong and Macao	Parts of Guangzhou, Shenzhen, Dongguan, Zhongshan, the entirety of Zhuhai (covering 19 districts of five cities) and the entire territories of the Hong Kong and Macao Special Administrative Regions	“Key Action Plan for Building a Livable Bay Area Around the Pearl River Estuary” (2010)
Guangdong–Hong Kong–Macao Greater Bay Area	National scale	To construct a dynamic world-class urban cluster, an international centre of technological innovation with global influence, a crucial support for the construction of the Belt and Road initiative, a demonstration zone for in-depth cooperation between the mainland and Hong Kong and Macao and a high-quality living circle that is suitable for living, working and tourism.	Central Government	Guangzhou, Foshan, Zhaoqing, Shenzhen, Dongguan, Huizhou, Zhuhai, Zhongshan, Jiangmen, Hong Kong and Macao	“Vision and Actions on Jointly Building the Silk Road Economic Belt and the 21st Century Maritime Silk Road” (2015); “Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area” (2019)

Source: This table is based on government documents.

From the perspective of national-scale theory, the upward projection of the political scale can provide the possibility of solving specific political economy problems (Brenner 2004). The reconstruction of the regional scale of Guangdong, Hong Kong and Macao is conducive to the development of the unique advantages of Hong Kong and Macao, enhances the status and functions of the Greater Bay Area in the country’s economic development and opening up to the outside world (Li 2017) and further facilitates the better integration of Hong Kong and Macao into the overall situation of the country’s development (The State Council 2019). The central government’s intervention in Guangdong–Hong Kong–Macao cooperation through national strategic embedding can avoid direct intervention by the central government in Hong Kong and Macao affairs, safeguard the integrity of Hong Kong and Macao’s high degree of autonomy and at the same time help to accelerate the integration and mobility of regional resources, which to a certain extent bridges the dilemma of intra-governmental cooperation (Wen and Lin 2020).

While the political embedding of the central government has reconfigured the dynamic mechanism of Guangdong–Hong Kong–Macao cooperation, leading to fundamental changes in the logic of regional cooperation, it also has certain limitations, which are mainly reflected in the following two aspects:

First, to a certain extent, it breaks the reciprocal relationship in the cooperation process. In the market-driven cooperation model, the principle of market equality and reciprocity drives the cooperation relationship among Guangdong, Hong Kong and Macao. In the politically embedded cooperation model, the central government’s engagement in regional cooperation may further aggravate the existing unequal distribution of political and policy resources among Guangdong, Hong Kong and Macao, since Hong Kong and Macao have enjoyed a high degree of autonomy and higher political status. In particular, in terms of resource allocation, the central government, in order to promote the active integration of Hong Kong and Macao into the national development, will often sacrifice the interests of Guangdong Province in order to “feed” Hong Kong and Macao. For example, the land jurisdiction of the Hengqin Development Zone in Zhuhai was ceded to Macao; Zhuhai had to comply with the political need to serve Macao by making costly arrangements to cooperate with Macao and venture into low-end industries (Hao and Duan 2021). Of course, from the strategic perspective of the overall national development, these arrangements by the central government are reasonable, but they are not conducive to the maintenance of a sustainable cooperative relationship among Guangdong, Hong Kong and Macao. On the one hand, they foster Hong Kong and Macao’s dependence on the central government’s “favourable policies for Hong Kong and Macao”, which in the long run will weaken the endogenous impetus for voluntary cooperation (Yang et al. 2022). Once the intensity of the central government’s favourable policies is reduced or shifted, discontent will inevitably arise in the societies of Hong Kong and Macao. On the other hand, this unequal pattern of cooperation will result in the mainland people’s lacking recognition of the Greater Bay Area’s cooperation, and even rejection.

Second, it is difficult to alleviate the excessive competition within the region. The GDP of Shenzhen and Guangzhou was rapidly catching up with Hong Kong, in 2017 and 2020, respectively, and soon exceeded Hong Kong (Figure 3), challenging Hong Kong’s position as the regional “leader”.

Figure 3. Comparison of GDP growth among Guangzhou, Shenzhen and Hong Kong. Source: Guangdong Provincial Bureau of Statistics (2016). 2016 Guangdong statistical yearbook. http://tjnj.gdstats.gov.cn:8080/tjnj/2016/ (accessed on 5 February 2024); Census and Statistics Department of the Hong Kong Government (2021). Hong Kong foreign direct investment statistics (1979–2021). https://www.censtatd.gov.hk/tc/EIndexbySubject.html?scode=260&pcode=B104000 (accessed on 5 February 2024).

There is also excessive competition in infrastructure development, such as the current five international airports within a radius distance of 80 km within the region (Figure 4), with Guangzhou, Shenzhen and Hong Kong airports all planning to become the air traffic hubs in the Greater Bay Area. Although the development positioning of each airport is different, the geographical proximity of these airports makes competition for passengers and airspace resources inevitable. To further enhance their regional influence and compete for more passengers, the airports are also expanding, which will create a new round of competition (Liao et al. 2019).

Figure 4. Distribution map of major airports in the Guangdong–Hong Kong–Macao Greater Bay Area. Source: (Euromonitor International (2019), 29 August). Greater Bay Area airports: The fine line between competition and cooperation. Euromonitor International. Available online: https://www.euromonitor.com/article/greater-bay-area-airports-the-fine-line-between-competition-and-cooperation (accessed on 19 January 2024).

In addition, the deep integration has brought about unexpected new competition and conflicts. With the gradual improvement in regional infrastructure, electronic payment and convenient customs clearance measures in the Greater Bay Area, especially the introduction of the policy of “Northbound Travel for Macao Vehicles” and “Northbound Travel for Hong Kong Vehicles” in 2023, a large number of Hong Kong and Macao residents have been attracted to travel to and spend money in mainland cities such as Shenzhen, Zhuhai and Guangzhou. According to the latest statistics of the Hong Kong Immigration Department, in 2023, the number of Hong Kong residents travelling “northward” reached 53.34 million, while the number of mainland visitors travelling “southward” was 26.54 million. Such large-scale “northward” integration is rare. However, it is in line with the policy expectation of “supporting Hong Kong and Macao residents to integrate into the Bay Area” (Central Committee of the Communist Party of China and The State Council 2019). As long as the government focuses its policies on institutional innovation and infrastructure improvement and endeavours to reduce the costs of regional factor exchanges, rational market players will generate strong bottom–up momentum to promote regional integration. However, a large number of residents of Hong Kong have gone to the mainland for consumption, causing the catering and retail industries in Hong Kong and Macao to suffer a severe blow. Thus, some Hong Kong organisations have called on the government to levy a “departure tax” on permanent residents of Hong Kong (Wong and Amin 2024) to reduce their willingness to consume in the mainland. However, such “zero-sum game” thinking and administrative measures to restrict the flow of people in the region are against the current integration trend of the Greater Bay Area (Wen 2024). Therefore, how to effectively solve the new problems of regional integration will challenge the wisdom of the central and local policy makers.

5. Discussion and Conclusions

Taking the relevant policies for promoting Guangdong–Hong Kong–Macao cooperation as a clue, this study has explored the driving mechanisms and the inherent tensions of Guangdong–Hong Kong–Macao cooperation at different stages. The findings show that in the 1980s and 1990s, Guangdong–Hong Kong–Macao cooperation was mainly driven by market forces. However, due to internal and external factors, the market-driven cooperation mode has become unsustainable, and the problems arising from the integration of Guangdong, Hong Kong and Macao have become more and more prominent. The signing of the CEPA between the mainland, Hong Kong and Macao in 2003 under the impetus of the central government was the prelude to the central government’s intervention in the regional cooperation of Guangdong, Hong Kong and Macao. However, due to the failure to identify the interest convergence of all stakeholders and insufficient top-level design, the cooperation between the market and local governments in promoting regional integration and development was ineffective. In 2015, the central government formally put forward the concept of the Guangdong–Hong Kong–Macao Greater Bay Area to elevate the regional scale to the national level. Through approving planning and awarding “National Strategic Planning and Planning”, the central government is able to promote the development of the Greater Bay Area. By approving plans and granting the title of “national strategic region”, the central government has recentralised the power, more actively dominating and intervening in regional development, and thus forming a new national spatial development pattern according to the central government’s will (Zhang 2013). However, the embeddedness of national strategies also has certain limitations and brings new dilemmas: it breaks the reciprocal relationship in the process of cooperation and fails to ease the excessive competition within the region.

The Greater Bay Area is not only the experiment zone for the institutional innovation, but also the highland for scientific and technological innovation, as cross-border cooperation and interaction under the context of “one country, two systems” is unique and provides more opportunities and space for innovation and change (Yang et al. 2022; Yang et al. 2024). However, cross-border interaction also brings new challenges for local governments, since the central government has been embedded in regional cooperation. Local governments need to balance their accountability towards local residents and the implementation of central policies, which is worthy of more exploration.

In general, since the 1980s, Guangdong–Hong Kong–Macao cooperation has gone through different phases. To a certain extent, the different driving mechanisms at each stage have facilitated Guangdong–Hong Kong–Macao cooperation, but there are certain limitations, and there is an urgent need to further focus on top-level design and high-level promotion and to break down institutional barriers through effective institutional arrangements to rationalise inter-governmental and intra-governmental relations. To this end, the central government should strive to promote regional cooperation to achieve institutionalisation. The institutionalisation of regional cooperation can help establish clearer and more stable rules and expectations for cooperation and reduce uncertainties in the process of cooperation among Guangdong, Hong Kong and Macao, thus helping to balance the two driving mechanisms of the market and the administration, so as to bring into full play the strengths of both. First, the institutionalisation of regional cooperation can lower the market access threshold for the free flow of resources and factors among Guangdong, Hong Kong and Macao, optimise the allocation of regional resources so as to give full play to the strengths of Guangdong, Hong Kong and Macao in their respective fields, form regional functional positioning with complementary functions and avoid vicious competition. Second, by improving the regional cooperation system, the cost of institutional friction caused by “one country, two systems” can be further reduced, so that “one country, two systems” can be more operational and replicable in integrating different systems. Finally, the institutionalisation of regional cooperation can further reduce the room for excessive central government involvement in Guangdong–Hong Kong–Macao cooperation and return regional cooperation to a benign track of voluntarism, equality and mutual benefit.