CONFIDENTIAL
Details of sources of imports and principal markets are set out in Annex A to this note.
Hong Kong investment in China
20
Since Hong Kong companies are under no obligation to report external investment to the Government, it is difficult to cut through the rumours to established fact. Certainly the news media carry almost daily reports of new projects being mooted or being established.
Left wing
sources in Hong Kong claim that over 200 Hong Kong companies are already engaged in some form of co-operative venture in China with at least 250 more involved in negotiations. These figures are probably fairly accurate, although many of the projects are small scale. Industries involved include garments, electronic components, toy parts, tools and tooling, metal components of various kinds and cement production.
3.
Most of the Hong Kong firms involved have some form of compensation trade arrangement with the Chinese. Virtually all appear to be export orientated with the Hong Kong firms responsible for final marketing. There are three general forms of compensation trade:
(a)
(b)
(c)
The company supplies materials for processing while China provides the factory, equipment and labour and the company pays for their
processing.
The company supplies the capital equipment to set up a plant and also provides the raw materials. But the materials are processed free of charge, or at a reduced cost, in payment for the capital equipment.
The company provides the plant and technical assistance while China pays for the capital equipment by providing the raw materials and
processing them free of charge or at reduced
cost.
CONFIDENTIAL
/contd
2.