After introducing the GBA (Greater Bay Area) Framework Agreement, Foshan witnessed a surge in greenfield foreign direct investment (FDI) in 2018. From 2018 to 2020, the average annual number of greenfield FDI contracts, and contracted foreign capital, went up to 751 and USD 8,675 million, respectively. This was as opposed to previous figures of 200 and USD 3 million respectively. The GBA agreement resulted in an exponential increase in FDI. Clearly, Foshan is a main beneficiary of the GBA agreement. The top five sectors in attracting FDI have also changed before and after signing the GBA Framework Agreement. From 2011 to 2017, the top five industries by the average annual number of contracts were wholesale and retail trade, manufacturing, leasing and business services, real estate, and hotels and catering services. After the GBA announcement, the FDI share in wholesale and retail trade and manufacturing decreased significantly, whilst the share in leasing and business services increased by 15%. There were also more projects in scientific research, technical services and geological exploration, and culture, sports and the entertainment sectors. At the same time, job creation has also gone up.

This paper, entitled “Development Potential and New Opportunities for Node Cities in GBA A Case Study of Foshan” advances two explanations for why Foshan has benefited so much from the GBA agreement. The GBA agreement has resulted in improvement in transport networks, as well as integration amongst the Greater Bay cities. So the reasons why Foshan has benefited so much include, first, increased population, and second, commuting convenience. Regression analysis found that population and length of rail transit provided good explanation for the change in the number of greenfield FDI projects and job creation in retail sector. Specifically, the results (please refer to the table below) show that a one percentage point increase in population or the length of rail transit can lead to an increase of 8.622%, or 2.103% respectively, in the number of projects. Their impact on job creation is very similar (8.242% and 2.134%, respectively).

This study was conducted using city level data due to data availability. Future research may seek to use individual level data in Foshan city instead.

By CHOW Yi Lin, Dawn

Researchers: Chi ZHANG, Xuyao ZHANG, Jingwei ZHOU