In the long term, enhanced connectivity to the Greater Bay Area population, as a result of the deal, has the potential to cement Hong Kong’s status as a global data hub.

“Hong Kong already has a substantial network of subsea cables that connects the city with global metros, strong telecommunications coverage, and a global ecosystem of enterprises,” says Cathie Chung, Senior Director, Research, JLL Hong Kong.

Along with the new deal, these conditions make the established data centre market an ideal hub. “It can serve as a staging ground for operators planning to enter the Mainland market, or as an outbound hub for Chinese operators and enterprises to expand globally,” Chung says.

The relaxation of cross-border data transfers would be particularly welcomed by many companies operating in Mainland China.

Under the Personal Information Protection Law and the Data Security Law of the PRC, the transfer of personal data and “important data” from GBA locations in the Mainland to Hong Kong is currently only possible if one of three criteria is fulfilled, according to Edmondson.

”This includes either the use of standard contractual clauses published by the CAC, the obtaining of certification by the transferor, or — depending on whether personal data volume thresholds are met or the nature of the transferor’s operations — a lengthy security assessment review by the CAC,” says Edmondson. “In some circumstances, the security assessment is the only permitted option.”

But this could change with the introduction of the new rules.

“Depending on what the new rules entail, having a data centre in Hong Kong may become a more straightforward option for companies that would otherwise need to set up a facility in Guangdong province to store certain types of data in Mainland locations of the GBA,” says Edmondson.

The challenges of acquiring the necessary licences to build and operate a data centre in Mainland China, and the power scarcity in neighbouring Shenzhen, also work in Hong Kong’s favour.

“It’s comparatively easier to set up a data centre in Hong Kong,” says Fung. The agreement will provide an additional incentive to lure operators to the city, where they can expand as a hub to serve the wider population in the Greater Bay Area, he adds.

Development in the city has been on the rise in recent years, with roughly 500 MW of data centre capacity slated to come online by 2028 — building on the 600 MW of capacity available today, JLL data shows.