The GBA: 6 Key Sector Opportunities (Part 1) by Chibo Tang & Karen Wong

1 March, 2021

China’s transformation from being the low-cost factory of the world just over a decade ago to the leading innovation and technology powerhouse that it is today has been nothing short of extraordinary.  With the introduction of the Greater Bay Area (GBA) region initiative in 2016, China will continue to drive its transition into the New Economy with an even more focused approach, emphasizing Innovation & Technology (I&T) and also the increased integration of its mainland cities and the Special Administrative Regions (SARs) of Hong Kong and Macau.  Altogether, this will position the GBA as the largest and most influential Bay Area economy in the world. 

The GBA is a sweeping plan that encompasses the core cities of Hong Kong, Macao, Guangzhou, and Shenzhen, positioned as the leading engines of regional development, as well as key node cities that include Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen, and Zhaoqing, with each node city building upon its own industry clusters and sectoral advantages.  All 11 cities will be closely linked in future regulatory policies and frameworks, with the aim to deepen cooperation and jointly raise the overall quality of the region’s economy. 

As the GBA develops, numerous opportunities will emerge, leveraging upon existing industry clusters and capabilities, as well as stemming from the unique differences that the cross-border nature of the region presents.  At Gobi, we see 6 key sectors at the forefront of the region’s development.  These key sectors have been highlighted in various government policies and industry whitepapers, and have shown tantalizing promise with representative unicorns having already emerged.  The six sectors are: Artificial Intelligence (AI), Industry 4.0, Consumer, Fintech, Healthcare, and Sustainability.  

In Part 1, we will briefly discuss 3 of 6 key sectors: Artificial Intelligence (AI), Industry 4.0, and Consumer.  

Artificial Intelligence (AI) is One of the Most Exciting Sectors in the GBA 

The Chinese government has identified the AI sector as one of the most promising sectors to develop in the GBA.  With the region’s top universities based in Hong Kong and Shenzhen, local talent has grown steadily over the years.  Today, the GBA is already home to 226 AI-related startups, second only to Beijing, and more than Shanghai, which has 181.  Altogether, the region’s AI cluster contributed a total value of over RMB 30 billion in 2020, putting it on the map as a global AI innovation hub. 

One representative unicorn in the AI space is SenseTime – the largest AI unicorn by valuation as of 2018, when it raised US$2.5 billion at a valuation of more than US$7.5 billion.  It may be surprising to some that the world’s most valuable AI company was actually founded in Hong Kong.  To this day, it remains headquartered in Hong Kong Science & Technology Parks Corporation (HKSTP).  This leading AI company develops several types of AI technologies including facial recognition, image recognition, object detection, optical character recognition, medical image analysis, video analysis, autonomous driving, and remote sensing for all types of industries. 

Gobi and the Alibaba Hong Kong Entrepreneurs Fund have also been active contributors to the local AI ecosystem.   Gobi and the AHKEF unveiled its HKAI Lab program in 2018, in partnership SenseTime, Hong Kong Science and Technology Park (HKSTP), Alibaba Cloud, and Alibaba DAMO Academy.  The HKAI Lab is a not-for-profit six-month accelerator program, and aims to empower AI-related startups by inspiring new ideas, bring new products and technologies to market, and share knowledge among academics, scientists, and entrepreneurs.  We’ve seen first-hand how AI technologies can actually cut across all sectors, and we expect there to be plenty of overlap with the other sector opportunities discussed below.  

Gobi GBA AI infographic

Industry 4.0 will Transform the GBA into a Smart Manufacturing Hub

“Made in China 2025” was initiated in 2015 and is a 10-year developmental roadmap led by Premier Li Keqiang with a mission to transform China into a global high-tech manufacturing powerhouse across 10 key sectors by 2025.  China aims to build a globally competitive modern industrial ecosystem to revolutionize the supply chain and upgrade the traditional manufacturing industry in all aspects of the value chain.  

Each GBA city will play an important role in the development and rollout of Industry 4.0 technologies.  Zhuhai and Foshan will spearhead the industrial belt for advanced equipment manufacturing on the west bank of the Pearl River, while Shenzhen and Dongguan will position themselves as high-end manufacturing bases for electronic communications.  Hong Kong, Macao, Guangzhou, and Shenzhen will be core centers of innovation and R&D, as well as house a high concentration of headquarters for global enterprises.  The rest of the key node cities such as Jiangmen, Foshan, and Huizhou will continue to build upon existing industry supply chains.  Together, this will enhance collaboration and greatly improve industry standards and practices amongst the advanced manufacturing value chain in the GBA. 

One well-known unicorn in the Industry 4.0 space is DJI – the world’s No. 1 drone manufacturer.  The company is based in Shenzhen and was valued at approximately US$16 billion as of April 2018, when it raised over US$1 billion.  Today, DJI boasts over 70% share of the world’s civilian drone market and continues to innovate in the drone equipment and camera sector.  Its success is driven in large part by its mastery over key production processes such as injection molding and precision machining, as well as its access and proximity to the largest manufacturing hub in the world – the GBA.

Consumer-Centric Innovation Driven by Gen-Z and the She Economy

The value of the GBA’s consumer retail market is projected to double by 2025.  There is also a steady rise in consumer spending across Guangdong province vis-a-vis the rest of the country.  In addition, with the GBA being a key manufacturing base and home to many suppliers and Original Equipment Manufacturer (OEM) factories, the region is ripe for new brands and products to emerge.  

There are 2 key groups that are influencing the consumer sector in China.  The first group being Generation Z or Gen-Z: those born post-1997 and the first generation to have access to the Internet and portable digital devices their whole lives, dubbed as “digital natives.”  Currently, the Gen-Z demographic makes up 20% of China’s population.  The preferences, lifestyles, and spending habits of Gen-Z are truly unique, with a preference to buy products directly via social media channels rather than through other mediums being just one example. 

The second group is comprised of increasingly affluent and independent women, or the “She Economy,” which was coined by China’s Ministry of Education in 2007.  China’s She Economy is currently valued at US$700 billion and is driven by over 400 million women between the ages of 20 and 60.  Today, 63% percent of China’s female population is employed, which is much higher than the rest of Asia-Pacific and drives 41% percent of China’s GDP.  Female consumption patterns are also expanding to influence a diverse range of products, including traditionally male-oriented segments such as liquor, automobiles, and sports.  Companies these days are targeting this large consumer base by creating massive marketing campaigns on International Women’s Day, Queen’s Day, or Goddess Day. 

One representative unicorn in the Consumer sector in the GBA is Perfect Diary – one of the most exciting new e-commerce beauty brands in China.  The brand was established in 2015 in Guangzhou by parent company Yatsen Holding Limited (NYSE: YSG), which listed on the New York Stock Exchange in November 2020.  As of February 2021, the company has a market capitalization of nearly US$12 billion.  As a budget-friendly cosmetics brand that utilizes a Direct-to-Consumer (DTC) model, Perfect Diary appeals to the younger generation of female consumers by leveraging social media influencers and KOLs.

To be continued…

Given the length of the content, we will publish this article in two parts, with Fintech, Healthcare, and Sustainability sectors to be discussed in Part 2.


About the Co-Author: Chibo Tang, Partner 

Chibo Tang has been investing in early-stage companies in the technology and media sectors in China for over a decade.  He is Head of the Hong Kong office, overseeing Gobi’s Greater Bay Area practice, and manages the Alibaba Hong Kong Entrepreneurs Fund, for which Gobi is the exclusive General Partner.  He’s led numerous investments including Airwallex, WeLab, GOGOX, Urban Revivo, Prenetics, DayDayCook, AutoX, and Sandbox VR

About the Co-Author: Karen Wong, Chief Diversity Officer & PR Director 

Karen Wong is Chief Diversity Officer & PR Director of Gobi Partners, based in Hong Kong where she heads its Public Relations, Diversity & Inclusion, and People & Culture initiatives. She focuses on building the Greater Bay Area (GBA) startup ecosystem and is part of Gobi’s GBA practice. Karen also manages the Gobi Internship Program which aims to inspire youth to develop a VC investor skill set and entrepreneurial mindset. 

About Gobi GBA

Gobi Partners is a leading Pan-Asian venture capital firm investing in early-stage startups across a wide range of technology sectors since 2002. We have 13 offices, a footprint that covers Northeast Asia, Southeast Asia, South Asia, and the Middle East. In Hong Kong, Gobi is the exclusive General Partner (GP) for the Alibaba Entrepreneurs Fund (AHKEF), building the Greater Bay Area (GBA) ecosystem. We’re about breaking barriers, levelling the playing field, and providing more access to entrepreneurs across Asia. For more details visit our Website or follow our social media channels: LinkedIn, Facebook, Instagram, YouTube.