Enterprises in the Guangdong-Hong Kong-Macao Greater Bay Area ( GBA ) view the Asean region as their top choice for overseas production and sourcing activities, a recent survey finds. In this context, Hong Kong serves as a vital regional trade and treasury hub, playing a significant role in the business process.

Moreover, an increasing number of GBA enterprises are willing to enhance their ESG investments, according to a report titled GBA Supply Chain Diversity: Enhancing Connectivity Among Asean, Hong Kong, and the Mainland. Jointly published by the Hong Kong Trade Development Council ( HKTDC ) and UOB Hong Kong on Thursday ( January 9 ), the report was based on a survey of over 600 GBA-based companies conducted in the third quarter of 2024.

For most GBA businesses, according to the survey, the mainland ( excluding the GBA area ) remains the preferred option for diversifying supply chain arrangements and broadening production capabilities. But among those looking to incorporate overseas locations, Asean stands out as the top choice, with 84% of surveyed enterprises indicating plans to maintain or expand their production and sourcing activities within the region. The primary driver for this preference, cited by 39% of respondents, is the positive nature of China-Asean trade relations, bolstered by the Regional Comprehensive Economic Partnership ( RCEP ) agreement and the Belt and Road Initiative ( BRI ).

Within Asean markets, Singapore, Malaysia, and Indonesia are favoured for current and future business activities. It is noteworthy that Indonesia has jumped from 6th place in 2023 to third place in 2024 as a destination for GBA business activities. However, respondents also note challenges in entering these markets, including the need to find suitable local service providers ( 32% ), maintain data security ( 25% ), and source talent with the necessary expertise ( 25% ).

The domestic market is particularly attractive for procurement, with over half ( 53% ) of GBA manufacturers looking to procure from the mainland ( excluding the GBA area ). In terms of production, 43% of surveyed manufacturers aim to strengthen their production lines in Asean countries in view of their young workforce and lower costs. Hong Kong, as a super-connector for both the GBA and Asean, is expected to enhance transport capabilities, with 39% of respondents willing to invest in improving transport within the GBA.

“When a company enters Southeast Asia, it will initiate a complete supply chain shift that gradually matures,” explains UOB Hong Kong chief executive officer Adaline Zheng. “Hong Kong, as a super-connector, is leveraged by many businesses as an import and export platform or as a venue for overseas investment, given its status as a regional treasury hub. Companies strategically choose to place their management talent in Hong Kong.”

The majority of survey respondents ( 60% ) see the GBA supply chains as highly innovative, supported by the extensive deployment of effective digital solutions.

ESG investments

Parallel to their focus on enhancing supply chain resilience, many GBA businesses are committed to accelerating their ESG initiatives. Notably, 81% of respondents have active green and sustainable development programmes in place – an increase of 16 percentage points from the 65% recorded in 2023.

There is also a growing willingness to increase ESG investments. The average budget allocation for ESG investment among GBA enterprises in the next two years is HK$462,535 ( US$59,449 ), significantly higher than the 2023 figure of HK$371,333. Within the GBA, Hong Kong enterprises excel with an average ESG investment budget of HK$935,659 over the next two years, nearly three times that of mainland GBA enterprises.

“GBA companies are demonstrating a genuine commitment to sustainability, as evidenced by the planned 25% increase in ESG investment over the next two years. With approximately three million enterprises in the GBA, this could translate to a total ESG-related investment of around HK$1.3 trillion,” says HKTDC director of research Irina Fan.