Hong Kong and the Pearl River Delta

Hong Kong is located near the mouth of the Pearl River, which flows from Sichuan Province through southern China. The delta lies in Guangdong Province, where Deng Xiaopeng’s economic reforms began in 1981 with the establishment of the first “special economic zone” (SEZ) right next to the border with Hong Kong. This border already had great significance in Chinese economic history. In 1949, after the Communists rose to power, capital of all sorts drained out of the mainland and into Hong Kong. Money, talent, labor, experience, ideas, and energy brought a new level of activity to Hong Kong that the British alone had never achieved. Many refugees chose Hong Kong over Taiwan because it was more established. Their greatest priority was economic security, and this mentality continues in Hong Kong today. Though many yearn for democracy, the most important thing to the average Hong Kong person is the stability of the economy.

The Hong Kong economic juggernaut that started in 1950 attained new heights after the opening of China through the nearby SEZ. Where once garments and toys labeled “Made in Hong Kong” were common, production facilities shifted to the mainland to take advantage of cheaper land and labor. This produced a spatially bifurcated economy known as the “Front Shops, Back Factories” model. The capital, design, and leadership come from Hong Kong, while the raw materials and labor come from the Pearl River Delta. Hong Kong’s special role as a gateway to China became more important and enriching than ever, now that China was eager to export.

Today, however, exactly what the special role is for Hong Kong is less clear. When SARS struck Hong Kong in 2003, the economy took a nosedive. Commercial activity came to standstill. Today in Hong Kong, residents often remark on this or that place that they used to go to that closed during SARS, never to re-open. After the epidemic, what saved Hong Kong was the Pearl River Delta. At the request (more like desperate begging) of the Hong Kong government, the Chinese central government eased the border control between Guangdong Province and Hong Kong. A special, easy-to-get visa that allowed day trips to Hong Kong by mainland visitors was created. Now, the new middle and upper classes created in China by the economic reforms come to Hong Kong to spend hundreds of thousands of yuan on the very latest genuine designer merchandise. As in 1950, Hong Kong prospers from capital flowing over the border from China. This time, however, it’s a reciprocal relationship – Hong Kong is still a major source of the venture capital that supports the Pearl River Delta enterprises that are creating new wealth in China.