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How a new era of mega-regions is taking shape

Across the world, mega-regions are increasingly becoming the economic powerhouses.

May 14, 2019

Amid rapid urbanisation, neighbouring cities are joining forces to create mega-regions that are increasingly driving the global economy.

China’s Greater Bay Area is a mega-region the twice the size of Belgium spanning 11 cities including the financial hub of Hong Kong, the administrative and trading hub of Guangzhou, and the technology-rich city of Shenzhen, connected by high-speed rail and infrastructure that enables people and businesses to communicate efficiently.

North America boasts several mega-regions including the San Francisco Bay area while in Europe, the likes of the Netherlands’ Randstad has significant economic clout.

“Mega-regions have a high degree of connectivity between their multiple city centres, and specialism that boost economic productivity,” says Jeremy Kelly, Director, Global Research, JLL. 

With 70 million people, the Greater Bay Area is home to just under five percent of China’s population, but contributes 12 percent of China’s total GDP, making it one of the nation’s most productive economies. The government has announced plans to turn the region into a global technology innovation centre, and lower barriers to inter-city financial trading.

“Top-down coordination by city authorities is key in connecting regional cities that excel in different skills and industries. As part of as a unified mega-region, each city then plays a crucial role in enhancing the region’s overall value and productivity,” says Daniel Yao, Head of Research, China, JLL.

Response to urban growth

In China, city planners are investing in mega-region policy and infrastructure to strategically distribute the country’s fast expanding industry and population.  

A recently announced mega-region initiative aims to develop 19 clusters of smaller cities around a primary hub, including the Greater Bay Area, as well as the Yangtze River Delta economy around Shanghai and the Jingjinji region around Beijing.

The cities of Jingjinji, for example, could help absorb Beijing’s high rates of growth – and alleviate its pollution and congestion.

“Many of the cities in the proposed mega-regions are leading innovations in secondary industries such as manufacturing and logistics,” says Yao. “Mega-regions can attract more talent from other areas, facilitate each city’s economic growth and technological capability, and overall, lead China from an investment economy to a consumption-driven economy.”

China’s far from the only country looking to mega-region to manage economic growth.

“This is a response to the frenetic pace of urbanisation, a way to diffuse the pressure on the world’s major cities,” says Kelly.

In the UK, for example, the upcoming high-speed rail HS2 could mean the emergence of a new mega-region between London and Birmingham, helping relieve the pressure on the capital’s housing and traffic.        

Challenging cities  

A hurdle for burgeoning mega-regions is the scale and cost of investment required to develop transport and infrastructure that enables citizens to work or trade across metro areas.

“A crucial concern is how talent can be more mobile, and how information is shared,” says Yao.

Across the Greater Bay Area for instance, three currencies are in use, while commuters travelling between Hong Kong, Macau and mainland China need to show identification.

For city authorities, it can also be a challenge to consider their cities as part of a collective economy.

“Where the region now called the Greater Bay Area formed quite organically, planned mega-regions such as Jingjinji rely on policy and infrastructure development. That makes it a bigger challenge for city authorities and businesses to integrate into a regional agenda and regional systems,” says Warner Brown, Director for China Research, JLL.

Even when city governments excel at fostering close economic ties, forging cultural ties can be more difficult. “Cities are such proud entities, whose citizens – the most important element – take pride in their unique legacy,” says Kelly.

In the Netherlands, the Randstad mega-region spanning dozens of cities was established decades ago, setting the stage for the Holland Metropole where high-speed rail connects Amsterdam, Rotterdam, Utrecht and The Hague, allowing each to draw on the resources of three other cities under an hour away. “Yet people living in Amsterdam and Rotterdam see themselves as disparate, for example, as might those in Manchester and Liverpool,” says Kelly.

Working together

The success of China’s Greater Bay Area and Yangtze River Delta also indicates the importance of complementary industries within modern mega-regions. “For the Chinese mega-regions that are to be developed, authorities could look to how the Greater Bay Area and Yangtze River Delta have divided economic functions between their cities,” says Brown.

Likewise, San Diego and Tijuana represent a region with a complementary economic relationship: San Diego is a high-tech innovation centre that meshes well with the manufacturing hub of Tijuana, and commuters flow steadily between the two. Uniquely, this region also straddles country borders.

“Typically, geopolitical tensions and sheer distance would make mega-regions across country borders a major challenge both administratively and culturally,” say Kelly. “However, San Diego and Tijuana show that cross-border mega regions can be successful – and similar cross-border economies could be said to exist between the neighbouring cities of Copenhagen and Malmo, and Vienna and Budapest.”  

Future of the global economy

With nearly 70 percent of the world’s population predicted to live in cities by 2050, mega-regions are set to become increasingly influential.

“These urban networks will play a more prominent economic and political role,” says Kelly. “City governments are tending to be more outward-looking in their perspective, connecting with each other directly on initiatives such as climate change and sustainability.”

As such, these urban areas are likely to be where critical global decisions are forged.

“There will potentially be a degree of power shift from national to city level,” concludes Kelly. “People living in the world’s most productive mega-regions will lead the charge when it comes to responding to the challenges of our global society.”

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