In 2019, the Guangdong-Hong Kong-Macao Greater Bay Area Development Plan emphasized that it is necessary to promote the rational division of labor among large, medium and small cities in bay area, to optimize the regional functional layout and to improve the regional development coordination. In 2017, the GDP of the bay area exceeded 10 trillion Yuan, surpassing Russia and ranking the 11th in the world rankings. It is equal to South Korea and surpasses the New York Bay Area and the San Francisco Bay Area, becoming one of the most dynamic areas among the world. As an emerging urban agglomeration, the economy of the Greater Bay Area has a strong development potential. According to World Bank statistics, more than 60% of the global economy is concentrated in the Bay Area [1]. Guangdong-Hong Kong-Macao Greater Bay Area?GBA? is a manufacturing base which has great influence in the world. In the past 40 years, due to the manufacturing industry’s low production factors and decreasing transaction costs, GBA has occupied a stable position in Global Value Chain (GVC?. However, with the increase of the labor costs and changes in international trade relations, the advantage of the area is facing severe challenges from the internal and external environment. Enterprises that are mainly based on international OEMs are squeezed by the main players of the GVC chain, and are also chased by lower production costs in Southeast Asia. Therefore, under the traditional GVC industrial growth model, the industrial development momentum of GBA has gradually weakened. At the same time, the urban development in the GBA is uneven and inefficient. The total GDP of the three cities Guangzhou, Shenzhen and Hong Kong, is ten times that of the four cities. Jiangmen, Zhuhai and Zhaoqing. The coordination of internal labor among the cities is inefficient and unsustainable; the industries in each city are crossed; the resources are competing. To change this situation, we first divide the cities from the perspectives of the Global Innovation Chain?GIC), making full use of the strengths of each city. In accordance with GVC and GIC, we form a synergy between value creation and innovation in the cities and closely integrate the industrial clusters to break the administrative boundaries and to achieve the optimal allocation of production factors and innovation elements. Based on this, the main purpose of this paper is to study the current urban division of labor in GBA. Drawing on the experience of building an international first-class bay area, we explore how to leverage the advantages of the cities, and how to integrate the innovation elements, with the intention of enhancing the status of GBA in the GVC, and building GBA into an international first-class bay area.

The meaning and method of urban division of labor

With The Expansion Of The City Scale, Modern Cities Have Gradually Formed A Cluster Of Cities Consisting Of Central Cities And Surrounding Cities. GBA Is A Form Of Urban Agglomeration That Was First Derived From The San Francisco Bay Area. Urban Division Refers To The Division Of Labor In A City Group Based On Geographic Area, Industrial Chain And Value Chain. Economic Growth And The Rise Of The Knowledge Economy Have Also Changed The Urban Division Of Labor System. In The Theory Of Urban Division Of Labor, The First One Is The Regional Division Of Labor. Hao Shouyi (1999) Believes That Regional Division Of Labor Is An Organic Combination of Social And Economic Activities In Accordance With Certain Rules In The Geographical Space. This Division Of Labor Is First Manifested In The Division Of Labor And At The Same Time It Must Be Implemented In Space. Zhang Dunfu (1999) Believes That Geographical Division Refers To The Implementation Of Regional Specialized Production On The Basis Of Full Use Of Regional Advantages In All Regions Of A Country. It Can Also Realize The Product Value Through Interregional Exchange And Satisfy The Own Demand For Products That Are Not Suitable For Production In The Region. Thereby It Can Expand Regional Production Capacity And Enhancing Regional Interests. In Short, Regional Division Of Labor Enables Each Region To Obtain Higher Resource Allocation Benefits, Promote The Development Of The Region's Own Economy, Through Developing The Specialized Sectors In The Region [2].  Second, With The Rise Of Major Industrial Sectors, The Division Of Value Chain And Industrial Chain Has Attracted The Attention Of Many Scholars. The Division Of Value Chain Is Composed Of Numerous Value Links. Enterprises In The Value Chain Carry Out Various Value-Added Activities From Design, Product Development, Intermediate Products And Final Product Manufacturing To Marketing, Sales, Consumption, After-Sales Service, And Final Recycling [3]. The Division Of Industry Chain Is Mainly Based On The Comparative Advantages Of Each Region. With The Help Of Regional Markets To Coordinate The Division Of Specialization Between Regions And Multi-Dimensional Needs, The Division Of Value Chain Is A Regional Cooperation Carrier And The Industrial Cooperation Is The Realizing Forms And Contents. There Are Many “Value Links” In The Value Chain. When A Series Of Economic Activities In Competition Carried Out By Enterprises In Industrial Chain Are Defined Only From The Perspective Of Value, The Industrial Chain Will Be The Industrial Value Chain. The Industrial Value Chain Is The Structural Form of Value Organization And Creation Behind The Industrial Chain. It Represents and Reflects the Deeper Value of the Industrial Chain, and Determines the Business Strategy and Competitive Advantages of the Industrial Chain. In Recent Years, Innovation Has Promoted The Steady Development of China's Economy, And The GVC Is Becoming A New Situation of Innovation And Development. The GIC Aims To Make Full Use Of Global Innovation Resources To Carry Out Open Innovation And Realize Knowledge Economy. Larson And Brahmakulam (2002) [4] Argue That The Innovation Chain Is A Process That Links Knowledge, Innovation And Wealth To Promote Economic Development And National Prosperity. Ma Lin And Wu Jinxi (2011) Believe That The So-Called GIC Refers To Enterprises Searching For Available Knowledge Resources, Paying Attention To The Use Of Resources On A Global Scale, And Having A Highly Open Value Network Innovation Model [5]. Zheng Wenfan (2018) Believes That The Innovation Chain Can Be Divided Into Five Branches: Scientific Innovation Chain, Technology Innovation Chain, Engineering Innovation Chain, And Industrial Innovation Chain, Institutional Innovation Chain, Which Involves Multiple Subjects, Multiple Elements, And Multiple Steps. The Innovation Chain Is The Whole Process Of Value Creation, Spanning Multiple Time And Space Until The Final Result Is Achieved [6]. Fang Peng (2016) Believes That China's Industrial Innovation Pays More Attention To Technological Innovation And Neglects Other Aspects, Lacks Synergy Between Industries, And Fails To Form A Mature GIC [7]. GBA is a national-level strategy with the goal of building an international first-class bay area. Therefore, we must study the construction of the GBA with a global strategy, study the status of the GBA in the GVC, and study how to enhance the status of the international division with GIC. Based on this, GBA will be placed in the global environment to explore how the 11 cities will build a GIC and form a coordinated industrial system with division of labor. Among them, the GIC division refers to an innovative development model in which each city exerts its own advantages through division of labor, absorbs global innovation elements, and shares innovation results with surrounding cities. GIC is divided into five links for research in this paper education, finance, emerging industries, manufacturing, and commerce. At the same time, they correspond to five innovative factors talent, capital, technology, production and market.

First of all, the urban division of labor is conducive to the city's full use of talent, capital, technology, location and other advantages for innovation and development. In Tokyo Bay Area, Tokyo is the largest economic, financial, and transportation center. In Japan, there are more than one-fifth of the universities, three-tenths of university faculty, one-fourth of private research institutions, and one-half of top technology companies gathering in Tokyo. They provide talent, capital and technology support for the economic development of the Bay Area. Yokohama is the second largest city in Japan which is dominated by heavy chemical industry. 

The industrial output value of refining, electrical appliances, and food, machinery and metal products accounts for 80% of the total industrial output value, which is very competitive in the market. At the same time, with the superior geographical location, the bay area has formed a horseshoe-shaped port group connected by the six ports of Yokohama Port, Tokyo Port, Chiba Port, Kawasaki Port, Kisarazu Port and Yokosuka Port, with an annual throughput of more than 500 million tons. Driven by the huge port group, the Tokyo Bay Area has formed two industrial zones---- Keihin and Jingye. They are well developed in equipment manufacturing, steel, chemical, modern logistics and high-tech industries, and have exerted the greatest advantages of each city in the zones. [8]. Secondly, urban division of labor is conducive to the accumulation of production factors and innovative resources. Fujita and Tabuchi (1997) discovered that the Tokyo-based manufacturing sector gradually shifted to the Pacific industry belt by studying the spatial and temporal evolution of the urban division of Tokyo Bay Area after the Second World War. Instead, the Tokyo Bay Area gathered more productive services and Japan's large enterprise headquarters, which has demonstrated increasingly strong production service functions such as headquarters management, R&D design, and financial business [9]. Kolko (1999) examined the impact of information technology on urban development in the United States, and found that advances in information technology have concentrated manufacturing in small and medium-sized cities, while service industries, especially producer services, have concentrated mainly in large cities [10]. In addition, the radiation effect of the growth pole after division of labor will agglomerate resource elements, making the core city become the talent gathering center, information exchange processing center, value-adding center and economic growth center [11], thus enhancing the city’s professionalism. Thirdly, the division of labor can promote the diffusion of factors and enable the core cities to drive the economic development of the surrounding cities. As the scale of the city expands and the level of development increases, the spillover of economic activities in core cities will continue to increase [12]. Innovative elements such as capital, technology and talents are continuously diverted to surrounding cities through a series of transmission mechanisms, which forms the sharing of resources, environment and infrastructure. At the same time, the close connection of industrial activities will gradually promote the process of building urban functional areas with integration tendency and achieving optimal market-selective planning, which allows the surrounding cities to complete the different industrial positioning with different central points, thereby reducing decision-making costs and risks. Such being the case, it is necessary for cities in GBA to carry out a rational division of labor and strengthen the cooperation between cities. Making full use of the advantages of each city, absorbing global talents, technologies and other innovative resources will provide a continuous source of power for the economic development of GBA and even the world.

Research methods and data sources

The current research on urban division of labor is based on two types of methods. The first one is the cluster analysis and principal component analysis. Although both of them can divide the functional division of cities, they cannot make quantitative analysis, and it is also impossible to compare different cities horizontally. The second one is the statistical methods of indexing, such as the Nelson standard deviation method, the specialization index method, etc., but the results obtained cannot reflect the intensity of urban functions. The improved location commercial method adopted in this paper can directly calculate the degree of specialization of the industries in each city, and reflect the current status of urban division of labor by comparing cities [13]. In addition, the method has nothing to do with the division of industry and region, and has the characteristics of time and space stability and symmetry.

Among them,   the location business (specialization index) of the industry j in i city, which is measured by the number of employed people. Stands for the number of employed people in the industry j in i city.   Stands for the total number of employed people in i city. 

Is the total employment of the j industry in GBA. E is the number of Employed persons in all industries in GBA. The improved location quotient index is (-0.25, 0.25).

1. indicates that j industry has a comparative advantage in i city, and the larger the value indicates the higher the degree of specialization.

2. Indicates that j industry has a comparative disadvantage in i city.

3.  Indicates that j industry is at a balance of power in  i city.
This article will study the nine cities of Guangdong, as well as Hong Kong and Macau two special administrative regions. The data of the nine cities of GBA are from the “Employed population by industry” table of the China City Statistical Yearbook. The data of Hong Kong and Macau are from the “Total employment by industry” table of the China Population and Employment Statistics Yearbook.

By solving the collected data with the improved location quotient, it is found that Guangzhou has a highest trade index among the cities of GBA; Shenzhen has the highest manufacturing index and new industries index is also outstanding; Hong Kong’s financial industry has significant advantages, and the commerce and trade industry scores are also high; Macau's entertainment and gaming industry is the most prominent, while the commerce and trade industry has certain advantages. The dominant industries in Dongguan, Foshan, Zhongshan and Zhuhai are manufacturing industries, and the phenomenon of industrial homogeneity is serious. It can be seen that GBA failed to fully subdivide the cities according to GIC. The division of labor between cities failed to maximize the advantages of each region, and the links were not close enough to form a joint force.

Education is the starting point of GIC, and it is the basis for innovation to accumulate and cultivate talents for innovative activities. Institutions of higher learning and R&D institutions, as gathering places for talents, often promote the creation of new knowledge and new theories. Colleges and universities are not only the cradle of talents, but also play the role of the basic and theoretical innovation in the innovation chain. It is necessary to explore the theoretical innovation achievements of colleges and universities, and lay a solid theoretical foundation for the completion of the output of the subsequent research and the development of the innovation chain. The data shows that in 2013-2017, the average number of college students in Guangdong Province reached 2.46 million; the number of graduates exceeded 700,000; and there were nearly 150,000 faculty members. 

In 2016, two of the 173 colleges and universities in GBA ranked among the top 100 in the world. Compared with the three major Bay Areas, there are 3 in the San Francisco Bay Area, 2 in the New York Bay Area, and 2 in the Tokyo Bay Area, which is comparable to GBA. In addition, GBA also possesses 43 national key laboratories. There are 201 provincial key and 64 key enterprise laboratories in the Pearl River Delta. The number of talents is quite rich [14], indicating that GBA has the basic conditions and sufficient talent reserves for building a GIC. Compared with the International first-class bay area, there is still a certain gap in the  basic and theoretical innovations in GBA. On the one hand, there is insufficient reserve for cutting-edge talent. At present, GBA has only one of the top 100 innovation institutions in the world, but there are 20 in the international first-class bay area in the Tokyo Bay Area and 8 in the San Francisco Bay Area, which indicates that though GBA has a certain foundation of research, but cutting-edge talent is still very scarce. On the other hand, the level of specialization of education division among cities in GBA is not high. The two existing top 100 universities in the world are located in Hong Kong, and the universities in the inland nine cities are mainly located in Guangzhou. In 2016, there were 1,057,300 students in Guangzhou, accounting for 43.0% of the GBA. While Hong Kong and Guangzhou are stocking a great number of talents, it is possible to run on the educational output of the surrounding cities, which shows that GBA has not yet formed a suitable university cluster development model. How to cultivate and attract cutting-edge talents, increase the reserve of cutting-edge talents, and balance the distribution of educational resources in GBA is an important issue in the development of a collaborative and innovative GBA.

The financial industry provides funds for each link of GIC, perfecting the financial market system and providing stable financing sources for innovative enterprises. It is important parts of making the theory go to reality and a necessary condition for the formation of the innovation chain. The developed financial industry in the three major Bay Areas of the world provides financing channels for enterprises to achieve “production and prosperity”, and the company has obtained sufficient space for innovation and development. In 2016, Manhattan, the financial and economic center of the New York Bay Area, created an output value of around 70% of New York City in an area of 8%. At the same time, Wall Street has more than 2,900 world finance, securities, futures and other institutions to provide convenient and diversified financing channels for enterprises. Tokyo, as the fifth largest GFCI index in the Tokyo Bay Area, is the financial core, and spreads to the surrounding areas and helps to economize the entire Tokyo Bay. This shows that a sound financial market plays an important supporting role in gathering capital elements and promoting industrial innovation. Compared with the global financial center data, Hong Kong and Shenzhen have the most obvious financial advantages in GBA.  Currently, Hong Kong's GFCI index ranks third only to New York; Shenzhen ranks 18th, with a strong upward trend. As a financial center, Hong Kong's financial sector accounts for nearly 85% of its GDP, and its level of development is high. Shenzhen has a Shenzhen Stock Exchange, and the number of companies listed in Shenzhen is large, and the proportion of GDP in the financial industry is also on the rise. The Shenzhen Stock Exchange and the Hong Kong Stock Exchange are two world-class stock exchanges. The total market capitalization and number of listed companies are among the highest in the world. They provide funding sources for nearly 20,000 high-tech SMEs in the Pearl River Delta, and provide important financing channels for building the GIC of the GBA. The existing financial system has not yet reached the international first-class level, and has not fully utilized capital power to promote the accumulation of innovation factors. The listed companies in the Hong Kong Stock Exchange and the Shenzhen Stock Exchange account for only 3% and 12% of the new economic sectors, far lower than the 60% and 47% of the NASDAQ exchanges and the New York Stock Exchange. With the diversification of listed companies' industry distribution and demand, it needs further discussion and thinking that how to promote Hong Kong and Shenzhen financial intercommunication, provide effective financial support and risk diversification functions, meet their investment and financing needs, and accelerate the construction of the GIC.

Emerging industries are located in the middle reaches of the innovation chain and play a central role in the innovation chain of GBA. The strategic emerging industries mainly developed in GBA are information technology, big data industry; electronic information industry; biomedical industry; electric power industry and new energy new materials industry [15]. Research and technology is the backbone of developing emerging industries. Source Guangdong Statistical Yearbook, GDI Think Tank At present, the total number of invention patents in GBA is much higher than that of the other three major Bay Areas, and it is growing rapidly. However, the number of Patent citation was only 0.42 million times, only 1/8 of the average level of the three major Bay Areas. The patented results have no obvious guiding effect on the social economy, and the quality is far lower than other Bay Areas. There is only one of the top 100 innovation institutions in the world, which is far from the 20 and 8 in the Tokyo Bay Area and the San Francisco Bay Area. Insufficient technological innovation capability is not conducive to the innovative development of emerging industries. In addition, among the emerging industry patents in 2015-2017, Shenzhen accounted for more than half of the total volume of GBA with 121.69 million pieces. There are only 44 in Macau, accounting for only 0.16%. It can be seen that Shenzhen has a dominant position in emerging industries, and the innovative capacity of emerging industries in the cities of GBA is extremely unbalanced, which is not conducive to the formation of the industrial innovative chain in GBA. Therefore, how to play the leading role of Shenzhen in the field of innovation, synergistically drive the development of emerging industries in surrounding cities; how to form innovative industrial regions to attract talents and technology from all over the world, and develop GBA into an international first-class bay area, which will be Strategic issues.

The manufacturing sector is the link to convert results of theoretical innovation into reality, which is the actual productivity in the innovation chain. Being an influential manufacturing base in the world, GBA is a manufacturing link in GIC, whose manufacturing employment provides sufficient labor for the production of R&D products. Manufacturing sector in GBA is densely distributed in the core and surrounding cities, among whom the top three are Dongguan, Shenzhen and Guangzhou, accounting for 23%, 22% and 15% respectively. The total employment of manufacturing in Dongguan, Foshan, Huizhou and Zhongshan reached 98.18 million, accounting for 51%, higher than the international first-class GBA, providing sufficient human resources for R&D. As can be seen from the Figure 3, the total number of manufacturing in Guangzhou and Shenzhen is 7,065,400, accounting for 37% in GBA, which is equivalent to the number of manufacturing in the last nine cities. With the increase of labor costs and the change of international trade relations, OEMs are subject to orders causing a large number of manufacturers have been unable to continue because of the failure to turn around. At the same time, the existing empirical research shows that GBA has many types of industry, among which service industry and manufacturing industry have high coupling, but urban division lacks of coordination, leading to overlap, competition and other conflicts. Therefore, how to strengthen the professional functions of the core cities of GBA under the high value-added original functions of R&D, design and trade so as to make full use of the superiority of the labor force in the surrounding cities transforming the research and development results into products and improving the level of division of labor in each city is a question worth exploring.

As the terminal of the GIC, the commerce and trade industry is linked to bring the high-tech products to the market, and also the driving force for transforming scientific innovation into productivity and economic growth. The study finds that closely related to the trade and economic growth of the entire GBA the port economic development is highly fitted to the regional GDP, which is also an important node for international trade. With the geographical advantage, GBA has the largest population of the world's seaport and airport group, surrounded by mountains on three sides. Port throughput of GBA ranks first in the world and the container throughput is 4.5 times total of the three major bays. It has three world-class ports such as Guangzhou, Hong Kong and Shenzhen. Meanwhile, Zhuhai Port and Dongguan Port are also developing strongly. As can be seen from the above table, the port economy of GBA is mainly dominated by Guangzhou Port, Hong Kong Port and Shenzhen Port, occupying 92% of entire GBA. Dongguan Port, Zhuhai Port and Jiangmen Port are closely following, providing a trading route for commercial trade in GBA. At the same time, as a business center in GBA, Guangzhou's development of port trade is conducive to promoting the coordinated development of the port city. Ports drive the city's economy through foreign trade, which will generate more freight demand, increase port throughput and expand the port size, thus forming a virtuous circle between cities and ports. However, compared with the international first-class bay area, the three world-class ports in Guangdong, Hong Kong and Macau are very close to each other, and there is a clear overlap with the industries in hinterland cities. The urban division is not clear enough, so the competition in commercial trade is fierce and difficult to form a joint force. Therefore, how to plan the major ports and make rational use of the status of the Guangzhou Business Center in order to drive the growth of the commerce and trade industry in the surrounding areas. Improving the efficiency of resource utilization will directly affect the circulation of all links in the innovation chain.

The particularity of GBA lies in its multi-faceted pattern of “one country, two Systems, three legal domains, and four core cities”, which is both characteristics and the biggest difficulty of GBA. How to realize the organic integration of economic models in Hong Kong, Macau and the Mainland cities under “One Country, Two Systems” so that the free flow of resource elements and the parallelism of action management can give full play to the innovation factors of various regions for collaborative innovation is a major challenge for GBA. It is the breakthrough of creating a GIC of GBA to promote the formation of industrial integration and enhance the competitiveness as well as capability of independent innovation of GBA.

Basic research is indispensable for building GIC and talents are the basis of innovation activities. Hong Kong has two of the world's top 100 universities, while Guangzhou has nearly half of the university resources in nine cities in the hinterland. The two cities have absolute advantages in quality and quantity. GBA should make full use of the basic innovation and theoretical innovation ability of institutions of research institutions, promoting the flow of innovation theory through close scientific research exchanges between universities in order to maximize the use of innovative resources and improve the efficiency of innovation. Subject to different institutional mechanisms in GBA, there are still obstacles in carrying out scientific innovation activities among researchers across the region. Talents flow and research funding have largely hindered cross-regional scientific research cooperation. GBA should break down institutional barriers and maximize the synergy in the innovation process of the three regions. First of all, GBA build a “band-shaped radiation” university group, learning from the “multi-center  +  axis”  university  group  model in New York, the “multi-center complementary” university group model in San Francisco; the “Center + Bentham” university group model in Tokyo [14]. In this way, GBA can better explore mutual recognition of specific course credits, implement more flexible exchange arrangements and simplify the talents settlement system to ensure the social welfare of cutting-edge talents so as to reduce the loss of talents. In the development of integration with international talents, GBA should develop the green channels for science and technology talents and set up an international talent zone relying on Shenzhen Qianhai, Hong Nansha, and Zhuhai Hengqin Free Trade Zone. GBA should give full play to the advantages of university resources attracting well-known scholars at home and abroad. To promote innovation in talents, technology and management experience, GBA should make full use of Hong Kong's industrial and geographical advantages, attracting global high-tech enterprises to invest and build factories with the freedom of entry and exit, efficient capital and information circulation, and less language barriers. Local enterprises enhance cooperation with multinational corporations to promote the process of joint research and development and cultivate their own professional talents. Furthermore, the corresponding featured institutions should also be established. In the course of the development of universities in GBA, the diversification of university types within university grours is the basic condition for the formation of a good ecosystem of higher education in GBA [14]. Diversified colleges and universities cultivate talents in different fields, forming a social environment in which competition, struggle, and innovation can survive. GBA should adapt to the surrounding cities of the three core cities and explore diversified types of higher education institutions with diverse levels and distinctive features to provide high-end talents.

A small and micro enterprise is the majority of 20,000 high-tech enterprises in GBA, including many early-stage innovative companies. There gather 449 companies of Guangdong’s Top Five Hundred Enterprises with huge capital demand. Therefore, PE and VC-based institutional investors accounted for 80% of the investment institutions in GBA. However, the current financial market mechanism in the three places is not perfect and there is a shortage of high-quality financial assets with single financial products. Focusing on the innovation chain, we must provide financial risk diversification for enterprises to better cultivate high-end manufacturing industry and realize innovation-driven development. GBA should also pay more attention on the investment and financing needs of technology enterprises of different scales, tailoring their financial investment and cash flow management. Therefore, GBA must give full play to the advantages of Hong Kong's world financial center and provide effective financial support for industrial innovation and technology-based micro-enterprises. Expand the space and channels for cross-border investment between the Mainland and Hong Kong as well as Macau, so that the financial products of the two places will be more compatible. Meanwhile, strengthen the cooperation between the Mainland and the Hong Kong Monetary Authority, further improve the policy of mainland enterprises to go public in Hong Kong with improved process efficiency and reduction of financing costs. In addition, we must grasp the development direction of cross-border RMB business and promote the development and upgrading of the real economy in GBA with financial innovation. As an important pillar of financial cooperation in GBA, the cross-border two-way RMB loans in the GBA have accumulated more than 80 billion Yuan in 2018, but it still cannot fully meet the cross-border capital needs of the GBA. The Financial Interconnection of GBA serves the economic and industrial upgrading of the GBA. There should be policy encouragement given priority to relevant financial needs. In the diversified system of “one country, two systems and three tax zones”, GBA should grasp the dividend of institutional advantages, improve the flow of funds, optimize the cross-border payment environment, and facilitate the flow of various innovative elements in GBA. Electronic check clearing facility should be continued to implement, the foreign exchange management system reform aspects of the implementation of pilot cross-border exchange of funds, and constantly improve trade finance compliance review mechanism, to create "financial opening test area" in order to promote the development of creative industries GBA.

To cultivate new industrial clusters and improve the quality of urban division, the government should encourage enterprises to carry out research and development activities around industrial needs, guiding enterprises as the mainstay of technological innovation. The three International first-class bay area are all of the Science and Technology Innovation with a densely populated area of universities, research institutes and R&D institutions. Besides, acceleration of the transformation of knowledge into technology and the industrialization of scientific and technological achievements. The government should guide the financial funds to improve the technological innovation capability of enterprises as a reform direction, including tax reduction and exemption policies. Risks come with investment in technology research, so the government should plan to strengthen the construction of a co-research platform to gradually improve the risk sharing mechanism. With the reduction of risks brought by technical and market uncertainties, enterprises are encouraged to further enhance technology innovation quality, especially in industrial application research. At the same time, enhance the technical testing and market inspection services of R&D products for industrial promotion. Strengthening scientific and technological cooperation in GBA and building the innovation circle based on new industrial clusters can thereby further promote the integration of high-tech results. With the supports of universities and enterprises, new industrial clusters form large urban agglomerations, radiating the development of surrounding areas [16]. The innovative resources from universities and the new industry in Shenzhen can bring out the utilization the manufacturing advantages of Dongguan, Zhongshan and Foshan, guiding the core cities to intervene in R&D and form supporting clusters for promotion of advanced technologies. With the complementary industry chain, development, transformation and application from a new industrial cluster will gradually guide GBA’s transformation from industrial clusters to innovative clusters and drive the innovation development through effective links in the innovation chain.

n the GIC, manufacturing is an important part of putting innovation theory into actual production. The specific performance of GBA's construction of GIC is that, with implementing the strategy of expanding domestic demand, GBA upgrades traditional manufacturing to promote the development of modern service industry, gradually embedding into GIC based on the foundation of GVC [17]. With the development of economic globalization, the increasing China's labor costs drive international OEMs to gradually shift to other countries. The era of demographic dividends has gradually passed. The traditional manufacturing industry which relies on low labor costs and extensive economic growth methods needs to be upgraded. The introduction and absorption of technology is essential for promoting transformation of traditional manufacturing and embedding GIC into industries. High-quality labor can promote the introduction and absorption of technology and enhance the upgrading of industrial structure, thereby providing impetus for developing advanced manufacturing industry [18]. To improve the quality of the workforce, the government needs to increase public education investment and increase vocational and technical training for the labor force in the leading industries. At the same time, enterprises and schools should collaborate to encourage the further study of the workforce. In the process of developing advanced manufacturing industry, it is necessary to improve internal division of labor and coordinate development. Guangzhou and Shenzhen should form supporting facilities with Dongguan, Foshan, Huizhou and Zhongshan. Guangzhou, Shenzhen and other major Academy dense core of the city should be committed to high-end industries, and the development of the core components, the Internet, big data, cloud computing, chain blocks and artificial intelligence and other emerging technologies. Dongguan, Foshan, Huizhou and Zhongshan make use of the accumulation of manufacturing industry and proximity to Guangzhou and Shenzhen, to focus on the electronic information industry and intelligent manufacturing, transferring the scientific and technological achievements of patent technology, genetic testing and AI image recognition from Guangzhou and Shenzhen. Industrialization [19].Cities with relatively low labor costs, such as Zhaoqing and Jiangmen, can undertake the industrial and capital transfer of other cities, and make the traditional manufacturing industry better. Zhuhai can make electronic information, petrochemical industry, home appliance electrical, precision machinery manufacturing, biomedicine and electric power industry become the leading industries, focusing on the advanced manufacturing with core techniques. The urban division can accelerate application of advanced technologies with the help of the coordination and collaboration between industries, helping Guangdong-Hong Kong-Macau Greater Bay Area develop the GIC.

With the advantages of the port group, GBA should develop the commerce and trade industry in the GBA. First of all, the government should strengthen planning and clarify the major and minor relationship between Guangzhou Port, Shenzhen Port and Hong Kong Port. The business scope of different ports will reduce vicious competition and repeated investment between each other. Guangzhou is China's largest distribution center for business flow, passenger and logistics. Therefore, Guangzhou Port can be regarded as the core of the GBA commercial and trade city group. Shenzhen and Hong Kong being the sub-core port cities, the government should make full use of Hong Kong's international status and influence to play an important role in the transit shipment, and make Shenzhen Port the port hub of the GBA. As the “leaders” in the port, Guangzhou, Shenzhen and Hong Kong should strengthen cooperation in container transportation, shipping finance, shipping legal arbitration, etc., so as to achieve a win-win situation and promote the development of hinterland cities and build the world-class commercial industry cluster. Secondly, GBA should also enhance the communication within the city group to form a joint force. With the advantages of Hong Kong's financial industry, Guangzhou can provide settlement and financing services for commerce and trade. By utilizing the advantages of Shenzhen's high-end information technology, it can create a high-end service industry and establish a professional market with brand influence. At the same time, Dongguan and Foshan can provide a production base for commercial manufacturing with advantages of its adjacent geographical location. This can form a development pattern of Guangzhou- Zhuhai- Foshan and Shenzhen- Hong Kong- Dongguan.

GBA shoulders the task of open innovation for the construction of China's GIC. With 0.6 % of the country's land area Guangdong contributes 12.57 % of Chinese GDP. The international financial market of Hong Kong and the prosperous foreign trade of Macau have brought more and more development opportunities to GBA. However, with the increase of the human resources cost and the overcapacity of urban division of labor caused by homogenization competition, the traditional GVC industrial model of GBA is faced with the weakening development momentum, which needs industrial upgrading by building a GIC. In the backdrop of GBA being a national strategy, Guangdong-Hong Kong-Macau Greater Bay Area has to adhere to innovation-driven economic growth to become Chinese economic growth pole, radiating South China. To reshape the momentum of sustained economic growth, the government must shift from embedding the GVC to building the GIC. With the integration of the geospatial and resource elements of 11 cities by specialized division of labor, GBA should focus on the growth of the three core cities, Guangzhou, Shenzhen and Hong Kong, and absorb global innovation elements for promoting collaborative innovation in surrounding cities. Change the current division of labor in the GBA and help build Guangdong-Hong Kong-Macau Greater Bay Area into an international first-class bay area.

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Figure 1: City Advantages of GBA.

Figure 2: Number and proportion of patents in emerging industries in 11 cities from 2015to 2017.

Figure 3: Employment and proportion of cities and towns in GBA in 2016.

Table 1: Global Financial Center Index.

characteristics

Table 2: Comparison of the Transformation Rate of Scientific and echnological Achievements in the Four Great Bay Areas in 2016

Table 3: Port throughput of Guangdong, Hong Kong and Macau GBA in 2016.

This study is based on the analytical-descriptive approach in addition to the inductive and deductive approach. The researchers used the data and financial indicators of the banks operating in Palestine, as well as the available literature, and previous research on the subject of banking mergers and integration. 

Study population and sample

The population and sample of the study consisted of all the banks that merged during the period 2010-2017, namely the National Bank Arab Bank for Investment, Al Rafah Bank, Union Bank of Jordan, Palestine Commercial Bank and Bank of Palestine, which have all the necessary financial data.

Study hypotheses

The study hypotheses were meant to examine the effectiveness of mergers as a tool to strengthen and modernize the Palestinian banking system. They can be hypothesized as follows:

H01: There is no significance for the instructions issued by the Palestinian Monetary Authority after 2010 regarding raising the paid up capital and granting incentive benefits for mergers with local banks in Palestine?

H02: Are there any motives that call for mergers in the Palestinian banking sector after 2010?

H03: There is no significance for mergers in strengthening and modernizing the system of local Palestinian banks?

Mergers and acquisitions in the palestinian banking sector after 2010

The following are the mergers that took place in the Palestinian banking sector after 2010, which came as a natural result of the new Palestinian Banking Law No. 9 Of 2010, which included several incentives for the processes of merger:

First: National Bank of Palestinian origin

The National Bank was established in 2012 as a result of the merger of the Palestinian Welfare Bank and the Arab Palestinian Investment Bank. The National Bank is currently considered as one of the most important commercial banks in Palestine. It is the second largest bank in terms of the paid-up capital $ 75 million. In addition to providing investment services, treasury and financing of small and medium enterprises, which have the lion's share in the Palestinian banking market; the National Bank is the fastest growing Palestinian bank and the second largest banking group providing comprehensive, integrated financial services for the corporate, retail, investment and microfinance sectors. With over 9,000 shareholders, The National Bank commands the largest shareholder base within the Palestinian banking sector and attracts the most respected and successful companies to its board. Some of these companies include MassarInternational Investment Company, PalTel Group, Birzeit Pharmaceutical Company and Mashareq for Investment & Development. The bank offers its banking services to its customers the various Palestinian geographic regions through its scattered 17 branches in the West Bank to provide its unique banking services to more than 80,000 customers. In addition, the bank offers banking services to its customers outside the geographic regions where its branches are located through electronic services such as electronic banking and mobile banking. The National Bank operates through an ATM network located in various vital and strategic locations in the West Bank. Although the National Bankis the most recent bank in the Palestinian banking market, it has been able to demonstrate its financial performance and prove that it is a Palestinian bank over the past years. The bank has been recognized as the fastest growing bank in Palestine in 2013, 2016, and 2017 by CPI Financial / Banker Middle East, the leading bank rating company in the Middle East; the CPI Financial has been ranked the bank as the fastest growing bank in the Middle East in terms of assets and liabilities The annual National Bank [8]. The National Bank was able to win the best treasury management prize among banks in Palestine Prize offered by the Banker Middle East magazine in 2014. Below are the mergers and acquisitions that took place in the Palestinian banking sector after 2010; the most important merger was the National Bank merger:

The merger between Al Rafah Microfinance Bank and the Arab Palestinian Investment Bank in 2012

At the end of 2012, a merger agreement was announced between Al Rafah Microfinance Bank and the Arab Palestinian Investment Bank to invest in one bank under the name of the National Bank Palestinian origin with a paid-up capital of $ 50 million in the first stage. The paid-up capital will be raised to $ 75 million in 2013. The agreement provides for the acquisition of the Arab Palestinian Investment Bank’s assets and liabilities by the National Bank formerly known as Al-Arabi. In return for the value of Arab Investment Bank's net assets, its shareholders receive shares in the National Bank. The Arab Palestinian Investment Bank was established in 1996 as a limited public shareholding company. In 1997 it started to provide services in 

accordance with the laws and regulations that are put in force in Palestine with a capital of $ 15 million in partnership with Arab Bank, International Financing Corporation and the Deutsche Bank to be the first Palestinian bank specialized in investment banking services. Since its inception until the end of 2010, the Arab Palestinian Investment Bank's management did not comply with the instructions of the Monetary Authority to increase the paid-up capital to a minimum of $ 50 million at the end of 2010 as per the requirements of the Palestinian Monetary Authority. On the other hand, Al-Rafah Microfinance Bank was established in 2005- to finance microenterprises- with an authorized and subscribed capital of US $ 30 million; however, 25% of the subscribed capital was paid in 2005. Since 2006, the Bank has not taken any action to increase the paid-up capital. The Bank's management did not comply with the Monetary Authority's resolution No. 5/2008 which called for raising the paid-up capital to $ 35 million or resolution No. 7/2009 which stated that the minimum capital required for the practice of banking was set at $ 50 million. This had promoted the two banks to sign a memorandum of understanding with the aim of reaching an agreement leading to the formation of a Palestinian banking entity integrated in the name of the National Bank that has the basic requirements and ability to meet the needs of the local market for different types of financial services and all segments of society and its economic sectors, on the one hand, and can stand all various types of crises and meet the requirements of the Palestinian Monetary Authority. The following are the most important financial statements of the two banks before the completion of the merger:

The motives for the merger of Arab Investment Bank with Al Rafah Bank for the formation of the National Bank in 2012

According to the financial statements of the banks in Table 3 above, the most important motives and reasons for the merger were the inability of the two banks to meet the requirements of the Palestinian Monetary Authority to raise capital despite the increase in the size of deposits in the Al Rafah Bank from $ 80 million in 2010 to $ 129 million with a growth rate of 61%. As a result, direct credit facilities increased from $ 42 million to $ 76 million, an increase of 81%. However, the bank's retained losses remained negative at $ ?2.1 million. When a shallow comparison of the most significant bank indicators with the financial indicators of the banks operating in Palestine in as shown in Table 2 above during the same period, it can be noticed that they are weak and below the required level of growth. Similarly, we find that the indicators and data of Arab Palestinian Investment Bank are below the required level of growth.

National bank's acquisition of the branches of al etihad jordan bank operating in palestine in 2015

As a result of the growth of National Bank after the merger in 2012 and will be shown later in Table 3 to assess the performance of the National Bank, the National Bank acquired the assets and liabilities of Al Etihad Jordan Bank that was operating in 2015 in Palestine by combining its assets and liabilities to the assets and liabilities of the National Bank. The partnership agreement was the entry of Al-Etihad Jordan Bank as a new strategic partner in the National Bank with 10% of the paid-up capital which was $ 75 million. The portfolio of Al Etihad Jordan Bank that was working in Palestine will be transferred to the National Bank's portfolio. It was also agreed to choose a member of its Board of Directors to represent it in the new bank’s Board of Directors. The following table shows the most important financial indicators of the Al Etihad Bank from 2010 until the year of acquisition 2014.

The motives for the al etihad jordan bank to merge with the national bank in 2014

In reference to the most important financial indicators of Al Etihad Jordan Bank as shown in Table 4 above and in comparison with the most significant financial indexes compiled for the banks operating in Palestine as shown in Table 2 above and during the same period, it can be notices they are weak and below the required level. The bank's capital structure index shows a drop in most indicators compared to the capital structure of the banks operating in Palestine; the same is true with respect to the liquidity index and the profitability index. Most of the reasons that prompted the bank to get involved into the partnership deal with the National Bank are attributed to its inability to meet the requirements of the Palestinian Monetary Authority. The data in Table 5 of the bank indicate that there is a deficit in the payment of the capital from 2011 until 2013; however, the deficit was resolved when the transaction was concluded in 2014 and the paid-up capital was raised to $ 50 million.

Assessment of the importance of mergers on the performance of the National Bank

The National Bank was able to demonstrate that it is a strong banking entity which develop steadily. Its financial results show a growth of 207% to reach $ 1,079.3 million at the end of 2017 which represents 7% of the total assets of the Palestinian banking sector compared to $ 350.8 million at the end of 2012; moreover, its liabilities increased by 227% to reach $ 299.5 million in 2012 and rising to $981.8 million in 2017 representing 7.2% of the total liabilities of the Palestinian banking sector. On the other hand, its deposits grew by 274% and became $ 808.7 million instead $ 216.1 million at the end of the year 2012. These figures represented 6.7% of the total deposits of the Palestinian banking sector. As for the direct credit facilities portfolio, it reached $653.8 million at the end of 2017 compared to 142.7% in 2012 with a growth rate of 358%. Net profit also witnessed some changes; it increased from $ 2 million in 2012 to $ 9.2 million in 2017. The total equity raised from $ 51.3 million in 2012 to $ 97.5 million in 2017 and a growth rate of 90% compared to the growth rate of the total equity of the Palestinian banking sector for the same period which was 39%; it is a clear crystal indication of the rapid growth of the bank in a short period As a natural result of the rapid development and growth of the National Bank and within a short period of time it was able to acquire a significant, controlling stake in Palestine Islamic Bank in March 2018 by purchasing 31,300 million shares of the Palestine Investment Fund and transferring other shares to its own [9]. In other words, the National Bank acquired 45% of the total shares of the bank in a deal worth up to $ 70 million. The merits of the deal resulted in that fact that consortium of shareholders led by the National Bank established the Islamic National Company for Investments, which bought 22 million shares of the total shares of the Islamic Bank of Palestine – which at that time was owned by the Investment Fund. A group of investors had invested their share about 9 million shares in the National Bank. Consequently, consortium became the dominant stake in the Palestinian Islamic Bank as it accounts for 45%. The Islamic Bank of Palestine remained an independent bank, maintaining its identity as an Islamic bank, to continue its business in accordance with the provisions of Islamic Shari'a. The change was only relevant to the Bank's shareholders and the rights of shareholders in the Palestine Islamic Bank; and the rights of customers and employees were also maintained. This transaction had a positive impact on both the National Bank and the Palestinian Islamic Bank [10]. Furthermore, this transaction resulted in two entities that are mutually integrated, strong and reinforcing that aim at serving the Palestinian national economy which will positively affect the customers and the quality of banking products and performance. In total, the mergers and acquisitions that the National Bank had been involved in since its inception have led to the growth of the bank and the rise of its financial indicators; this has strengthened its position and competitiveness and has become one of the leading national banks in the banking industry.

Second: Bank of Palestine

Bank of Palestine was established in 1960 as a financial institution that sought to improve the level of banking services in Palestine and finance various projects and meet the financial and banking needs. Bank of Palestine is one of the largest and most popular national banks in terms of number of branches and offices; it has the most widespread branch network in Palestine 74 branches, a paid-up capital of $200 million, assets of over $ 4.76 billion, with 1,731 employees serving more than917,076 customers. The Bank has adopted a holistic, sustainable growth strategy which focused on modern banking, technology and information automation through the continuous development of services, expansion and empowerment, and the establishment of new departments to achieve this purpose. It has a long-embedded presence and experience; it is constantly growing to be financially inclusive. In recognition of the role and achievements of Bank of Palestine,it keepscontinuously receiving local and international awards, most notably the award of the Best Bank in Palestine Award given by several prestigious international institutions. It was also awarded the Best Bank in the field of Investor Relations in Mashreq in 2017 by the Shareholders Relations Association Middle East, and the following are the mergers and acquisitions carried out by the Bank of Palestine to enhance its financial and competitive position:

The merger of the palestine commercial bank with the bank of palestine in 2016

In the middle of 2016, the Board of Directors of Commercial Bank of Palestine unanimously approved the merger with the Bank of Palestine through an exchange of shares in which every three shares in the Commercial Bank of Palestine are equivalent to one share in the Bank of Palestine. Alternatively, under this agreement, the deposits of the customers of Commercial Bank of Palestine and its facilitations and assets will be added to the financial indicators of Bank of Palestine. The shareholders of the Palestine Commercial Bank became an essential part of the investors and shareholders of Bank of Palestine. This partnership was reflected positively on the performance of Bank of Palestine in various fields of the Palestinian economy [11]. This merger was in line with the policy adopted by the Palestinian Monetary Authority to enhance the solvency and financial stability of the Palestinian banking sector and to enhance its ability to cope with the obstacles and risks that may strike the banking industry. The merger intended to prove that Palestine is the only investment compass of the two banks; it aimed also to enhance the trust in the Palestinian economy as well as contribute in the development of the banking industry. Finally, the merger was carried out to strengthen the capital adequacy. By referring to financial indicators of Palestine Commercial Bank, its total assets increased from $ 279.3 million in 2014 to $ 282.8 million at the end of 2015, with a growth rate of 1.2%. The total value of the assets of the Palestinian commercial banking sector increased from $ 243 million in 2014 to $ 244.8 million in the year 2015 with a growth rate of 0.7%. The growth rate of the aggregated liabilities of the Palestinian banking sector for the same period was 3%, while the total commercial equity increased from $ 36.3 million in 2014 to $ 38 million in 2015 with a growth rate of 4% whereas the total equity in the Palestinian banking sector increased by 0.2%. When considering the Palestine Commercial Bank net profit after tax, it had increased from $ 1.1 million in 2014 to $ 1.3 million in 2015 with a growth rate of 18%. The net profit of the Palestinian banking sector decreased by 9.6%. The bank's financial statements showed that it is growing at a low rate compared to the growth of other banks [12].

Motives for the merger of palestine commercial bank with the bank of palestine

By referring to the data and financial indicators of Palestine Commercial Bank, it can be noticed that it had faced an average loss of $ 4.5 million between 2010 to 2015 and that the bank's capital adequacy ratio had declined from 26.1% in 2010 to 15.7% in 2015, see table 6 below for the most important indicators of the bank. The Commercial Bank of Palestine faced a decline in all its main indicators, including the return on equity, return on capital and return on assets and from 2010 to 2015; weakness in the indicators of profitability and liquidity are below the required level compared with the indicators of the banking sector in Palestine. The Bank was unable to meet the requirements of the Palestinian Monetary Authority to raise the paid-up capital. For example, the bank was facing a deficit in completing the paid-up capital of $ 20 million from 2010 until the year of merger in 2015; consequently, the deficit increased to $ 45 million. The Commercial Bank of Palestine has approved the merger with Bank of Palestine in the middle of 2016 through an exchange of shares in which every three shares in the Commercial Bank of Palestine are equivalent to one share in the Bank of Palestine. The following are the main financial indicators of Commercial Bank:

Evaluation of bank of palestine performance after mergers of 2010

By referring to the financial indicators of Bank of Palestine, it can be noticed that it has been in constant development; its assets have increased from $ 4.1 billion in 2016 to $ 4.8 billion in 2017 with a growth rate of 18.5% that represents 31% of the total assets of the banks operating in Palestine while the growth of assets of the banks operating in Palestine was 11.7%. With respect to the liabilities, they increased from $3.7 billion in 2016 to $ 4.4 billion with a growth rate of 19%; it constitutes 32.5% of the total liabilities of the Palestinian banking sector. The volume of credit facilities increased in 2017 to reach $ 2.51 billion while it was $ 2.21 billion at the end of 2016 representing an increase of 13.7%. It constitutes 32% of the total facilities granted by the Palestinian banking sector. Furthermore, customer deposits increased by19.9% to $ 3.7 billion in 2017 compared to $ 3.1 billion in 2016 representing36% of the total deposits of the Palestinian banking sector, while the total property rights increased from $403.5 million in 2016 to $ 449.9 million in 2017 and at a growth rate of 11.4% constituting 25.6% of the banking sector's total equity which grew by 9%during 2016. The Bank achieved a net profit of $ 54 million in 2017 compared to $ 53 million in 2016. By looking at the Bank's financial indicators in depth as shown in Table 7 below, it can be noticed that the Bank of Palestine is one of the leading banks in Palestine Annual Reports, 2010-2017 [13]. As a natural result of the rapid development and growth of Bank of Palestine, it managed to acquire a controlling stake in the Arab Islamic Bank by getting about 52% stake in March 2016 [14-15]. The total assets held by Bank of Palestine within the Arab Islamic Bank were 39 million shares. This was the largest controlling share that came after an additional purchase of 31% of the bank's stake; it was around 21% of the Bank's shares up to 2015. As a result, the bank witnessed a significant change in the structure of its shareholders' when the ownership of the Al Fakhouri Group was transferred to the Bank of Palestine and the Palestine Investment Fund. There the share of the Bank of Palestine was about 52% and the share of the Palestine Investment Fund was about 35%. This change has impacted or influenced the structure, number and composition of the Board of Directors. The Arab Islamic Bank was established in 1995 and started its banking activities in the early 1996 [16]. It was meant to carry out banking and investment in accordance with Islamic Sharia. When the Bank of Palestine has acquired a controlling stake in Arab Islamic Bank, it was hoped to become a strong strategic partner that intends to work hard to achieve qualitative additions to Arab Islamic Bank [17-18]. This agreement will have a positive impact on both Bank of Palestine and the Arab Islamic Bank. This transaction will result in and constitute two mutually supportive entities that serve the Palestinian national economy. And again, this would be reflected on customers and on banking products. On the other hand, the Bank of Palestine's acquisition of a controlling stake in the Arab Islamic Bank would be a major lever for the Arab Islamic Bank. This was reflected in the paid up share capital of the Arab Islamic Bank, as shown in Table 8 below. The Bank's capital increased in 2016 to $ 62.5 million after it had a deficit of $ 25 million in 2015. However, in 2017, the bank increased the paid up capital to $ 69 million. As a result, the acquisition had impacted the financial performance of 2017; it increased from $ 794.1 million in 2016 to $ 1,041 million in 2017 with a growth rate of 31%. With respect to the liabilities, they increased from $ 718.9 million in 2016 to $ 934.1 million in 2017 with a growth rate of 29%. Moreover, the property rights increased from $ 75.2 million in 2016 to $ 106.9 million in 2017 with a growth rate of 42%, and consequently, the bank gained a profit of $ 6.4 million in 2017.