Co-founder Martin Keller recently went on a business trip to Hong Kong with Venture Leaders Fintech. In this article, he gives us an insight into how he experienced Hong Kong and the Greater Bay Area, and why he thinks that this region might become the next Silicon Valley within a few years.
I just returned from a business trip to Hong Kong. As part of the Venture Leaders Fintech cohort — a roadshow co-organized by Venturelab and swissnex China to create business opportunities for fintech startups in the far East –, I met representatives of international companies, local authorities, investors and fintech exponents from the Greater Bay Area. This region consists of nine cities in the province of Guangdong and the special administrative areas Hong Kong and Macau, all of which are vibrant economical centers. In my impression, the Greater Bay Area has all the ingredients to supersede the Silicon Valley as the number one tech hub within the next decade.
We all know that Hong Kong is a gateway to enter the Chinese and South Asian market as a European or American company, but actually, it is not just Hong Kong anymore. The cities around the bay are constantly growing and transforming the whole Greater Bay Area into a regional powerhouse.
Take Shenzhen, for example, a city with a population of 12.5m people that can be reached comfortably by car or the high-speed train from Hong Kong. Twenty years ago, you would have found only rice fields in this place. Today, Shenzhen is considered the new place to be for technology companies. The pace with which skyscrapers rise from the ground, and the amount of continuous public infrastructure investments to build a comprehensive transport network connecting the region on land and sea are fascinating.
Market and capital
A population of approximately 70m people (a little less than 1% of the whole country’s population) live and work in the Greater Bay Area. The region is responsible for 14% of Chinese GDP. GDP per capita is at $ 21,750 — almost five times lower than in the San Francisco Bay Area. These numbers highlight the huge potential for the region to catch up on the Silicon Valley.
The race to catch up also shows in VC investments. Currently, the US are still clearly ahead in terms of capital investments, especially with their technological flagships FANG (Facebook, Amazon, Netflix, Google). Yet, China’s BAT firms (Baidu, Alibaba Group Holding, Tencent Holdings) are growing fast. During the Single Day on November 11, Alibaba reported $38bn sales in one day! Baidu, Alibaba and Tencent also invest heavily in top fintech startups to diversify their market reach.
Access to a large pool of talents is a precondition for sustainable regional development. Hong Kong is home to five universities among the world’s top 100, and a strategic initiative on AI by China’s state council foresees an investment of 1 trillion yuan ($ 146bn) for developing China into a leading AI innovation center.
On our trip to the Greater Bay Area, we visited the fintech unicorn WeLab in Shenzhen. During the office tour at WeLab, I could catch a glimpse of the future of the fintech market in China. Watching 150 software developers programming on the same floor, with real-time reporting of their lending applications on a big screen above their heads, made me clearly aware of how live personal credit scoring works in China.
What struck me strongly is the clear roadmap of the Chinese authorities to turn the Greater Bay Area into a giant finance, trade, manufacturing and technology hub. In the past, we have heard of various clusters of companies from the same industry sharing land, labor and capital in a designated area. However, the current development in the Greater Bay Area is on a different scale. At the foundation of this transformation process lies a national master plan with large initiatives such as “Internet Plus”, which is designed to foster growth in China’s mobile internet, e-commerce, big data, IoT, cloud computing, etc. “Internet Plus” predominantly drives the fintech environment in China, but it is also adept for quick roll-over and adoption in other large Asian markets such as Indonesia (population: 255m) or the Philippines (100m). If you look at the sheer size of these markets, it becomes clear why Europe is not (yet) the first target market for super apps such as WeChat, Alipay or Meituan, each having 1bn+ monthly active users.
If you still doubt the ambitions to turn the Greater Bay Area into a fintech (or rather techfin?) powerhouse, let me cite a speech by Hong Kong Chief Executive Carrie Lam Cheng at the China Development Forum in Beijing in March: “In my view, the Greater Bay Area has good potential to become not only the Silicon Valley of the East, but also Silicon Valley and Wall Street within the same city cluster.”