Recently, the SZSE Research Institute completed and issued a research report named Study of Effective Capital Formation in the Guangdong-Hong Kong-Macao Greater Bay Area (hereinafter referred to as the report, which only represents the views of individual academic research). The report suggests that the Guangdong-Hong Kong-Macao Greater Bay Area (hereinafter referred to as the bay area) should adopt a market-based capital formation model to broaden capital formation channels and improve capital formation efficiency, so as to accelerate the transformation of technological innovation into real productivity and form a new source of economic growth. He Jibao, director of the SZSE Research Institute, answered reporters' questions on the report.

1.      Q: What are the research background and main content of the report?

A: The construction of the bay area is a major decision made by the Party Central Committee with Comrade Xi Jinping at its core and a major measure to fully open up China’s markets in the new era. On Feb 18, the CPC Central Committee and the State Council issued the Development Plan Outline for the Guangdong-Hong Kong-Macao Greater Bay Area, pointing out that it is necessary to give full play to the functions of capital markets and financial services in Hong Kong, Macao, Shenzhen and Guangzhou to jointly build a diversified, international and cross-regional investing and financing system of technological innovation. On Feb 22, General Secretary Xi Jinping emphasized at the 13th Collective Studies of the Political Bureau of the CPC Central Committee that finance is the important core competitiveness of the country. He also pointed out that it is necessary to deepen financial reform and opening up, enhance the ability of finance to serve the real economy, and improve the basic systems of the capital market, so as to build a standardized, transparent, open, dynamic, and resilient capital market. In this context, in order to give full play to its own advantages and better support the construction of the bay area, the SZSE Research Institute organized a research group to conduct in-depth research and completed the report. From the perspectives of historical development and realistic comparison of the four major bay areas of New York, San Francisco, Tokyo and Guangdong-Hong Kong-Macao, analysis is made on the problems that need to be further resolved during capital formation, and corresponding suggestions are proposed.

2.      Q: According to the research and analysis of the report, what role does the stock exchange play in the economic development of the bay area?

A: According to the report, a common basic feature of developed regions is the full use of the strong capital markets with the exchanges as the core. These regions promote capital formation and boost regional economic growth by pooling financial resources. According to overseas examples, stock exchanges have played a key role in the overall rise of bay areas. For instance, in every stage of the rise and development of New York and San Francisco in the US, exchanges have played a vital role. Another example is Tokyo. Thanks to the capital formation capacity of the Tokyo Stock Exchange, more than 50 Fortune-500 companies have gathered around Tokyo. In the bay area, SZSE and the Hong Kong Stock Exchange work with each other through the Shenzhen-Hong Kong Stock Connect program and have attracted a large number of financial securities companies and service agencies and big enterprises. There are more than 1,800 listed companies in Guangdong, Hong Kong and Macao. Among them, there are a large number of advanced manufacturers and technological innovation enterprises. According to domestic examples, the exchange market has also played an important role in promoting economic growth in the Pearl River Delta region. Through system mechanisms such as price discovery, resource allocation and corporate governance, the exchange market promotes the principle of "equality, fairness and openness", the rule awareness and the spirit of contract to take root in Guangdong, so as to boost market vitality. On the one hand, with the financial infrastructure of SZSE, an innovative capital ecosystem consisting of equity investing and financing, securities underwriting, securities trading and third-party services has been formed, and it generates huge economic radiation and effectively promotes capital accumulation. On the other hand, SZSE have strongly boosted the quality development of listed companies based in the Pearl River Delta. As of December 2018, there're 457 A-share companies listed on SZSE coming from the nine cities of Guangdong, accounting for 22% and 78% of the total listed in SZSE market and in Guangdong Province respectively. Such public companies based in the Pearl River Delta are presenting the group characteristics of tech ventures dominance, strong R&D competence, leading economic performance and huge social contribution.

3.      Q: When compared with the other three bay areas, how does the report say about the strengths and weaknesses of Guangdong-Hong Kong-Macao Greater Bay Area in capital formation?

A: The report holds that the overall pattern of the Greater Bay Area can be concluded as "one country, two systems, three free trade zones and four core cities." This is both a feature and advantage of the Greater Bay Area in development and a challenge for its effective capital formation. Compared with the other three bay areas, for one thing, Guangdong-Hong Kong-Macao Greater Bay Area enjoys certain edge in infrastructure construction, total economic scale, industrial development foundation and geological location etc. In particular, in recent years Guangdong, as the forefront of reform and opening-up, has been strong in economic vitality and kept rapid growth rate, having formed great investing and financing demands. We can say that Guangdong-Hong Kong-Macao Greater Bay Area has been equipped with the conditions of building a world-class bay area. For another, our Greater Bay Area somewhat falls behind in capital formation efficiency when compared with the other three bay areas. There are such issues as weak saving basis, insufficient diversity in capital ecology, homogeneous industrial competition, limited capital formation channels, low marketization level, high capital formation cost and inefficient institutional adaptation. These all imply large room for improvement for Guangdong-Hong Kong-Macao Greater Bay Area in efficient capital formation.

4.      Q: What are the suggestions put forward in the report on improving the effective capital formation capacity of the Greater Bay Area?

A: According to the report, the Greater Bay Area would be a place of creativity, communication, and high-end manufacturing that is open and livable. The planning and construction of the area shall give rise to the need for more capital. Therefore the capital accumulating capacity of the Greater Bay Area should be improved, a sound mechanism for capital formation be created and the capital allocation efficiency be increased. First, to set up a pilot area for implementing financial reform on the Greater Bay Area to marketize the financial sector, make international explorations, and give play to the crucial role of the market in allocation of financial resources, and to change the capital formation mode of the area. Second, to establish a coordinating office in the area for financial development. In specific, to coordinate monetary policies, financial development and regulation, and to marketize the financial sector and internationalize the RMB. Third, to implement the cohesion policy, namely, to set up Greater Bay Area development fund and cohesion fund, to narrow the gap between regions, enhance coordination between industries, and promote integration in the area. Fourth, to reduce entry barriers for Hong Kong and Macau institutions. To loosen restrictions on business registration, ownership percentage, business scope and qualification confirmation for Hong Kong and Macao institutions, so as to expand the channels for capital formation in the area. Fifth, to give play to the important role of SZSE in construction of a center of technology and innovation in the area, advance reforms of the ChiNext board, optimize the multi-tiered capital market, to increase the acceptance for new economy enterprises, and improve the creative capital allocation efficiency of the area. Sixth, taking the planning and construction of the Greater Bay Area as an opportunity, to innovate the cooperation mechanism between SZSE and HKEX, promote innovation in cooperation of two financial markets, and improve the competitiveness of the two exchanges.