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This period,
which we call the first investment wave, lasted from 1979 to 1989.
Hong Kong had become the biggest investor on and the biggest trade
partner of China's mainland. It was during this period that mutually
beneficial trade and economic cooperation began.
The golden
age of bilateral cooperation came in the following three years (1990
to 1992). During this second wave, when Western industrial countries
were afflicted by a sluggish market, production surpluses, financial
overstocks, contracting profits and heavy losses, Hong Kong
businessmen made 80 to 100 percent more profits and therefore became
the envy of all. In 1990, US $10 billion was invested in the
mainland; in 1991, the export trade between the two boomed. At the
same time, Taiwanese businessmen were catching up by making indirect
investments on the mainland.
These miraculous achievements
resulted from active cooperation between Hong Kong and the mainland.
As a senior official from the Hong Kong Ministry of Finance
commented, "The Hong Kong economy could not have boomed without
the increasing investment opportunities and the development of the
Pearl River Delta, the fifth dragon of Asia." A survey
conducted by the Hong Kong Industry Union in January 1992 shows that
Hong Kong investors are all satisfied with their business in the
area.
Early in
1992, after Deng Xiaoping's inspection tour to the south, China
speed up its reform. Hong Kong businessmen jumped emerged. This
period is characterized by huge projects, longer terms, larger
scales and syndicated investment.
Although
there are only five years to go before 1997, when Hong Kong will
return to mainland China, the chances of making profits will by no
means disappear with the deadline. These 10-odd years of investment
experience and businessmen that Hong Kong and the mainland have to
depend on each other : a flourishing and stable mainland is sure to
bring Hong Kong more profits while the constantly increasing Hong
Kong economy will be conducive to the modernization drive on the
mainland. Therefore, instead of confining their investment to the
neighboring Pearl River Delta, where they share the same dialect,
they are moving toward east, central, north, northeast, southwest
and northwest China.
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In April,
1992, hundreds of Hong Kong entrepreneurs who made early investments
in the pearl River Delta gathered in Hong Kong, exchanging their
investment experiences in the area. The businessmen agreed that with
the further opening of China, the delta is still appropriate for Hong
Kong's small-and medium-sized business to invest and establish
factories.
According to
Mr. Lin Shunzhong, manager-in-chief of Hong Kong Shanda Corporation,
which has more than 10 years investment experience on the mainland,
investment and money-making chances abound in the delta since it has
one of the world's fastest-developing economies. To encourage
ambitious Hong Kong enterprises from small-and medium-sized
businesses to try their hands on the mainland, he lists three
advantages: firstly, the infrastructure (including water and
electricity supply, communication, roads, and wharfs) is being
perfected ; secondly, foreign ventures have helped set up many
auxiliary industries and train millions of skilled workers and
management personnel; thirdly, the local officials, who are easy to
communicate with, are highly efficient.
It was
reported that an investigative group organized by the Hong Kong trade
and Business Management research Institute did some on-the-spot
investigations in a few cities and counties in the delta area in May
1992 and held trade talks about certain projects.
Some large
financially powerful companies also put their money into the Pearl
Delta area for relatively long terms. The Hehe Industrial Group run
by Hu Yingxiang, the New World Development Group of Mr. Zheng Yutong
and the Henry Y.T. Fok family have all actively joined in the
development of the delta.
Hu began to
invest in energy and transportation projects in China's mainland even
at the beginning of China's reform and opening period, and has
finished a power generating station and is working on a second and a
third. His Guangzhou-Shenzhen-Zhuhai expressway project succeeded in
collecting a record US $800 million in funds from 29 banks in Hong
Kong. According to Hu, construction of the Guangzhou-Zhuhai section
of the expressway and the bridge connecting Shekou and Zhuai will
start simultaneously in the third or the fourth quarter of 1992. The
two projects are scheduled to be completed by 1995 at an estimated
cost of H.K. $18 billion. The Guangzhou-Shenzhen section is already
under construction, and is expected to be finished by June 30, 1993.
This
expressway is actually the beginning of Hu's plan to build a
transportation network on the mainland. He also plans to connect
Macao and other cities besides the Pearl River. After 1997, when Hong
Kong and Macao are returned to China, Hu hopes to build an expressway
from Hong Kong to the Yangtze River Area.
Zheng Yutong,
who jointly built the Northern Ring Highway in Guangzhou with the
local government, has also invested in the construction of the Pearly
River Power Station, and is planning to get involved in real estate
business in Guangzhou, Huizhou and Shantou.
The power
station, costing an investment of $ HK 3 billion, is the most
expensive energy project in Guangzhou since new China was founded in
1949. Located in Nansha Economic Zone on both banks of the Pearl
River at humen, the station is already under construction. The first
phase of the project will be able to generate 3.3 billion kwh a year
after its completion at the end of 1993. Of the total it will provide
3 billion kwh to the environment in Guangzhou.
The most
ambitious plan of Zheng's group is the development of the Fangcun
overseas Chinese Town. Fangcun, located opposite the White Swan Hotel
in Guangzhou, has been neglected for years because of its
inconvenient location. Now Guangzhou is building a tunnel under the
Pearl River to connect the two sides of the river, which will enable
Fangcun, located at the exit of the tunnel and at the terminus of the
planned Guangzhou subway, will be attractive to investors. Zxheng has
inspected the Fangcun area and plans to build a town, occupying 8
million square feets, modelled on Jiandong style in Hong Kong, within
10 years.
Another large
project Zheng's group has invested in is a residential building
development plan on Ersha Island. The group signed the agreement with
Guangzhou government at the end of 1991 and will invest 300 million
yuan to build villas there with a total of 23,000 square feets of
living space.
In addition to
these, Zheng has also some other real estate development plans. If
his plans materialize, living conditions in Guangzhou and some other
areas in Guangdong will be greatly improved.
Fok's family
is going to produce container in Panyu, Guangdong Province, which
together with businesses in Japan, South Korea and the Chinese
hinterland, will be coordinated with the Henry'' group in the pearl
River Delta. The container project is scheduled to be in operation in
November 1992 with an annual production capacity of 26,000 20-foot
standard containers.
The group is
determined to join in the comprehensive development plan in Panya and
Nansha, which includes transportation, storage, industry, real estate
and entertainment facilities. The plan calls for several hundred
million yuan of investment in the 50-sq-km area. In February 1992,
Henry Y.T. Fok revealed that most of the land will be obtained by
offshore reclamation, which will take two or three years. The plan,
although not finalized, has started, and Nansha, as soon as the plan
is completed, will become a new seaside city.
Investment by
many large and small Hong Kong companies in the Pearl River Delta has
brought benefits to the processing, transportation, energy, commerce
and service industries, and resulted in great changes in the cities
and countryside there. A large number of people from the countryside
there. A large number of people from the countryside enter township
enterprises, and some new cities have been established on previously
undeveloped land. According to one statistic, there is one city or
town within every 70-sq km area in the Pearl River Delta, including
10 provincial level cities and 434 towns. Some medium-sized cities,
such as Shenzhen, Zhuhai, Dongguan, Zhongshan, Jiangmen, Foshan and
Shunde, have surpassed Guangzhou, Guangdong's capital, in economic
level, transport and telecommunications as well as other service
facilities. Several hundreds of small industrial town are scattered
around these cities, forming China's most prosperous, energetic urban
area. By the end of this century, they will have reached the level of
the cities in the intermediately developed countries.
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Most of the
investment from Hong Kong in the past was put into hotels, office
buildings and the processing industry, all of which earn bank their
original investment quickly. As Hong Kong's economy changed and the
mainland's reform and opening went deeper and deeper, some Hong Kong
business people began to move their investment to large capital
construction projects in China's hinterland. Large investments in the
Pearl River Delta and other areas in Guangdong Province by some
famous Hong Kong business people, like Hu Yingxiang, Zhen Yutong,
Henry Y.T. Fok, and Li Jiacheng, have attracted widespread attention,
and indicated a high level of interest to the Pearl River Delta.
In the process
of Hong Kong's economic transformation, the industrial and business
circles there pay more and more attention to scientific and
technological research and its application in industrial production
in order to transform its labor-intensive industry to science-and
technology internsive industry. In this way they have produced more
internationally competitive products with higher added values. But
since Hong Kong had traditionally neglected scientific and
technological research, its hi-tech research ability is relatively
weak. In the Pearl River Deltra and China's hinterland, however, the
scientific and technological research base is much stronger and some
hi-tech research has reached internationally advanced level that Hong
Kong cannot match.
On the other
hand, Hong Kong has more experience in the international market, more
marketing expertise and more information and better service
facilities compared to the mainland. This means there are many
possibilities for co-operation between Hong Kong and the mainland on
developing hi-tech products.
Currently, the
Pearl River Delta faces a problem: how to promote hi-tech research
and the development of hi-tech industry. After more than one decade
of co-operation between Guangdong and Hong Kong, Guangdong,
especially the Pearl River Delta, has established quite a competitive
labor-intensive processing industry. But it must rely on science and
technology to upgrade both products and their added values. Now
businessmen and experts from both Hong Kong and Guangdong have
realized that scientific and technological co-operation between the
two parties is quite essential to steady economic growth in Hong Kong
and the Pearl River Delta. So, Guangdong Province opened the Shenzhen
Scientific and Technological Industrial Park, Tianhe Hi-tech
development Zone in Guangzhou and Zhongshan Torch Hi-Tech Industry
Development Zone, forming a hi-tech development belt in the Pearl
River Delta. Some advanced hi-tech products have been produced and
launched on the international market, and many hi-tech enterprises,
at the same time, have been set up. These lay a foundation for the
further development of hi-tech industry in the area and augur well
for the future.
Guangdong
Province hopes more Hong Kong investment, meanwhile, will be put into
hi-tech industry, and some Hong Kong businesses are making moves in
that direction. One of the successful examples of this is the Shouhua
(Huizhou) Industrial Electronic Co. Ltd., a joint venture among
Beijing, Guandong and Hong Kong businesses that has a total
investment of more than US $20 million. The project, which began its
capital construction in 1991 in Huizhou, will be engaged in computer
engineering training, technological development and electronic
products manufacturing. Some 600 hi-tech engineers from inland china
are employed by the company, which is expected to have an annual
production value of US $250 million.
An editorial
in the Based-based Wenhui Daily on February 7, 1992, headlined
"Hong Kong Businessmen March to the Pearl River Delta,"
said hi-tech industry in the delta offers rather promising investment
opportunities.
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With the
expansion of China's reform and opening policy, Hong Kong business
circle also started to invest in other parts of China. On March 24,
1992 Zhou Nan, the director of the Hong Kong Branch of Xinhua News
Agency, described following new trends: 1. The scale of investment
from Hong Kong is becoming larger than before, especially investment
in the Pearl River Delta; 2. The scope of Hong Kong investment has
expanded to northeast, north, west, and east China; 3. Hong Kong
investors have begun to invest in a wider range of industries, such
as scientific and technological research, real estate, energy,
tourism, industry transportation, finance and stocks, rather than
just hotel and the processing industry.
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It has been
widely accepted that economic cooperation between Hong Kong and
China's mainland should not be limited to the Pearl River Delta, Hong
Kong people out to be encouraged to expand their cooperation to north
and inland China. The president of the Hong Kong trade Development
Bureau, Su Zeguang, said that in five or ten years, one of the
focuses of the bureau's cooperation with China's mainland will be
north China and hi-tech industry. The pearl River Delta, according to
Su, has developed a labor-intensive economy after more than a decade
of effort. Hong Kong must establish economic and cooperative trade
relationships with north China and the area along the Yangtze River
to smoothly promote the transformation of Hong Kong's industry. Like
the delta, north China and the area along the Yangtze River have
cheap land and labor costs and preferential policies. What is more,
the general educational and technical levels are also suitable for
Hong Kong to develop hi-tech industries, which will greatly
strengthen Hong Kong's competitiveness in the international market.
From this point of view, Su said Hong Kong businesses should enter
the north China market and develop themselves further by cooperating
with this region.
Actually, some
Hong Kong businessmen have already created successful examples for
others during their cooperation with north China. In Beijing, for
example, there were 849 joint ventures established by the end of
March, 1992 with Hong Kong investment, representing 46 percent of all
overseas-funded enterprises in Beijing, making Hong Kong the largest
overseas investor in Beijing.
Liang Qinrong,
the chairman of the Hong Kong Chinese Entrepreneurs association,
regarded this result as the beginning of more cooperation between
Beijing and Hong Kong, adding there is still potential for further
cooperation. Liang hoped Beijing would make full use its many
scientific and technological research institutes and achievements to
speed up commercial achievements. Liang also suggested that Beijing
stimulate its financial reform with reference to Hong Kong's
experience, attract more foreign banks to open their branches in
Beijing and set up a stock exchange as early as possible to make full
use of the country's large saving. The city, it seemed to Liang, also
needs to give more preferential treatment to foreign investors in
real estate.
Liaoning
Province in northeast China started its economic cooperation with
Hong Kong much earlier than other places in north China. There are
over 70 firms in Liaoning with an investment of over US $5 million
each. By the end of 1991, Hong Kong businesses had invested in 815
projects in Liaoning (accounting for 48 percent of all overseas
investment in Liaoning), making Hong Kong the largest overseas
investor in Liaoning, one of China's heavy industrial bases. Half of
these ventures are already in operation and are achieving satisfying
economic results.
Meanwhile,
trade relations between Hong Kong and Liaoning are increasing, with
trade between the two reaching US $689 million in 1991.
With further
opening of Liaoning peninsula, Liaoning is getting a third wave of
investment from Hong Kong. In March 1992, Liaoning held an eight-day
economic and trade cooperation fair in Hong Kong, signing 250
contracts, and bringing back Us $350 million in investment-mainly
from Hong Kong businesses. Another 102 investment agreements, with a
total invest of US $415 million, were also signed. Business circles
in the two places all agreed that the fair established a good base
for further cooperation between Hong Kong and Liaoning.
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Hong Kong
businesses have an outstanding record in investing in Pudong,
Shanghai's new development zone. In early 1992, Hong Kong's Lifeng
Enterprise Co. Ltd. and several companies on the mainland, including
China Chemical Import and Export Corp., launched Shanghai East Tank
Co. Ltd. with a total investment of US $27.1 million. It was the
largest joint ventures in Pudong up to that point, and one of the
largest oil and liquid chemical storage tank producers on the
mainland. Located at the mouth of the Yangtze River near to
Waigaoqiao free trade Zone, it is engaged in storing, transporting,
distributing, processing and transferring oil and liquid chemicals.
Previously Shanghai had lacked storage facilities and a specific
harbor for petroleum and liquid chemicals. The establishment of the
company fills the vacuum and will greatly promote the import and
export of oil and liquid products into and out of Shanghai. What is
more, the company will also enable Shanghai to deal with entrepot
trade and eliminate the risk of pollution posed by the transportation
of liquid chemicals.
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Tang Xianqian
is quite popular in the Xinjiang Uyqur Autonomous Region. In 1979 he
signed a compensation trade contract with Xinjiang on wool wear,
taking the lead among Hong Kong business circles. Later, he took part
in the establishment of Tianshan Wool Textile Co. Ltd. together with
a Japanese company, a Xinjiang textile plant, Hong Kong Pennisula
textile Co. Ltd. and Hong Kong International Cotton Textile Co. Ltd.
The registered capital of the joint venture has increased from over
US $8 million one decade ago to US $22 million. Tang has also
invested more than US $2 million in Tacheng, a border town, to set up
two wool textile plants.
Tang has also
succeeded in getting some other overseas investors to invest in
Xinjiang. In April 1992 Hong Kong Honghua group Ltd. set up Xinhong
Merchants Group Co. Ltd. with several domestic companies. Mayor of
Urumqi, capital of the Xinjiang region, hopes more and more overseas
businessmen will join in the development of western China.
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In April 1992,
Yunnan Yabiao Automobile Co. Ltd., the first joint venture in the
province's automobile industry, was established in Kumming, capital
of Yunnan Province. The joint venture between a local automobile
plant and Hong Kong Quantai trading Co. Ltd. included an investment
of US $9.8 million, becoming the biggest joint ventures in the
province's machinery industry.
After it
opens, the firm will be able to produce 15,000 light weight
automobiles with its products gradually entering the international
market.
The Hong Kong
partners hope to help Yunnan develop its light automobile industry
with the joint venture, and to eventually expand their business in
Yunnan and the rest of southwest China.
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Although Hong
Kong business people have done a lot in north, northeast, east,
southwest China, becoming successful in hotel, processing,
electronics, food, chemicals, agriculture, building materials,
transportation, finance and stock, that does not mean they have
neglected profitable business opportunities in central China.
In Henan
Province, for example, Hong Kong's Jinxin Group Built a large modern
gourmet powder plant in partnership with Zhoukou Prefecture. The
investment in the first term totaled US $9.8 million, enabling the
project to become the largest overseas-invested item in Henan
Province. When it goes into operation, the plant will be able to
produce 20,000 tons of gourmet powder, 45 percent to 75 percent of
which will be exported.
Hong Kong's
Yinfeng and Changsheng companies have a joint investment together
with Hubei House Construction and Development Corp. in Hubei Jianfeng
House Construction and Development Co. Ltd. the three parties
invested 50 million yuan in the 20-years project. The joint ventures
has got contract to build Jingling Garden Office Building (about
56,000 sq. meters) in Wuhan, capital of Hubei Province, an office for
Zhongnan Finance University, a luxury apartment building for East
Lake Villa Department and some other projects. Hubei Province hopes
to spur house construction by attracting overseas funds to speed up
reform of the housing distribution system and to improve living
conditions for local people.
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All
cooperative trading relationships should benefit both parties. This
is certainly true of Hong Kong in its relations with China's
mainland.
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The mainland
has invested some US $10 billion in Hong Kong. So far there are more
than 1,000 mainland-funded companies in Hong Kong, including China
Resources, Everbright, China Travel Service (Hong Kong), China
Merchants, Bank of China (Hong Kong) Group, Yuehai, China
International Trust and Investment Corporation (Hong Kong), Huaming
Group and Shanghai Enterprise Co. Ltd. scattered in various fields
and now an important part of the Hong Kong economy.
In March 1991,
the Hong Kong Chinese Enterprises Association was established to
organize Chinese companies in Hong Kong to join in the construction
of Hong Kong and promote economic relations between Hong Kong and the
mainland. By the end of that year, the association had 922 corporate
members and 30 individual members.
China
resources group, a member of the association, plans to take important
role in Hong Kong's international trade. In 1991 the group's
commodity trade - both wholesale and retail - and its transportation
and storage business achieved good result, enabling the group's
business volume surpassing US $6.5 billion. Now the group has 40
solely-owned companies and more than 100 shareholding companies in
Hong Kong, mainly in public service industries, harbors and hotels.
The Dalaoshan Tunnel, with a HK $2 billion investment from China
Resources, opened in June 1991. The Hong Kong International Container
Harbor of China Resources manages three harbors in Hong Kong. In
addition to these China Resources also has real estate for commercial
and industrial purposes.
Another
influential mainland company in Hong Kong is the Bank of China (Hong
Kong) Group. In 1991, the group's various businesses in Hong Kong saw
tremendous growth, and it has become the second largest banking group
in Hong Kong, accounting for 20 percent of all saving deposits in
banks in Hong Kong.
Ninety percent
of the deposits in the Bank of China (Hong Kong), however, were
invested in Hong Kong's economic development : its trade loan
business has achieved successive growth for years; its industrial and
commercial loans have increased rapidly in past years : and
industrial and commercial loans have increased rapidly in past years
; and industrial loans had reached as high as more than HK $14
billion by October 1991. In the past decade the group has also
provided over HK $40 billion in loans to Hong Kong people for house
purchases. Ling Guangzhao, the deputy-director of the group's
Macao-Macao Administration, said that the Bank of China (Hong Kong)
Group has become an integral part of Hong Kong's economy.
The mass media
in Hong Kong have reported that mainland-funded companies have taken
more active role in Hong's economy in the past few years, and have
contributed to the development of Hong Kong's economy in finance,
trade, real estate and tourism sectors and in Hong Kong's economic
relations with the mainland. The development of mainland-funded
companies has not only provided more jobs for local people but has
also contributed to the local government's revenue.
Hong Kong, an
important window for the mainland to economic exchanges with other
counties and regions, depends on the mainland, on the other hand, in
many ways. So the political and economic situation on the mainland is
especially crucial to Hong Kong's steady economic development. In the
past decade the mainland has focused on developing its economy,
expanding foreign economic cooperation, introducing overseas
investment and advanced technology. Hong Kong, meanwhile, actively
took part in the process with the help of its geographic and economic
advantages, which has also reinforced Hong Kong's positions as an
international financial center, free trade port and information
center. The development of the mainland's economy has been widely
regarded by international economic circles as a guarantee of Hong
Kong's prosperity. The economic cooperation between the two parties
in the past decade has provided clear evidence of this.
South China,
especially the Pearl River Delta area, has provided cheap labor, raw
materials and land, as well as preferential policies for Hong Kong
entrepreneur. This has attracted many labor-intensive processing
plants from Hong Kong and helped Hong Kong businessmen reduce their
production costs and strengthen their competitiveness on
international markets. In 1989, for example, the average annual
salary of each Hong Kong worker was US $11,000, but in Shenzhen,
where salaries were the highest in the Pearl River Delta, the average
was only US $2,500, while the cheapest in the delta area was only US
$600. There are more than 3 million people working at processing
plants in the delta for hongkong businessmen, so it is hard to
calculate how much Hong Kong business people have saved from paying
lower salaries in the past decade. What is more, taxes in the area
are also lower.
The mainland's
ambitious modernization program has absorbed a lot of idle capital in
Hong Kong. Hong Kong helps the mainland get funds, which consolidates
Hong Kong's position as an international financial center.
Hong Kong
plays an important role in promoting economic relations between the
mainland and Taiwan and the mainland's foreign trade, too. But, on
the other hand, the import and export trade and entrepot trade from
the mainland have become an important pillar of Hong Kong's economy.
In 1991, Hong
Kong's economy achieved a 4-percent increase compared with the of
1990, when many Western countries suffered from zero growth or
declines. Its position on the international trade list also climbed
from eleventh to tenth. Four factors, according to the Based-based
wenhui Daily, are responsible for its performance : 1. The stable
political situation in Hong Kong; 2. The signing of an agreement on
the new airport in Hong Kong and some other issues by the Chinese and
British governments ; 3. The stable political situation on the
mainland and the expansion of China's reform and opening policy ;
more Made-made commodities being sold in the mainland ; and the
growth of trade between the mainland and Hong Kong (more than US $60
billion in 1991); 4. Cheap land and labor costs in the Chinese
hinterland making Hong Kong's processing industry more competitive on
international markets.
Wenhui Daily's
analysis is considered objective, and indicated that the "China
factor" is a more and more important one in Hong Kong's economic
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China in Brief
