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Annex V
allowances have to be paid to the expatriates because of the high cost of living for foreigners in China.
50.
In respect of raw materials and
semi-manufactures, costs are often pushed up because of the need to import.' Some joint ventures are reluctant to rely on locally available raw materials and
semi-manufactures because the local supplies often cannot meet high quality standards and strict deadlines.
51.
Apart from operational costs, there are also hidden costs covering such areas as entertainment, commissions and consultancy fees.
52. A recent press report (attached as Annex V) gives a comparison of the production costs in Hong Kong and in Shenzhen. The figures shown should be regarded as indicative rather than strictly accurate.
Among the fifteen cost items compared, electricity, transportation expenses and managerial expenses were found to be more expensive in Shenzhen than in Hong Kong, while water supply, housing, corporate income tax, raw material supplies and factory buildings were found to cost less in Shenzhen than in Hong Kong.
53.
Some Chinese authorities recognize that high production costs may well stifle the interest of foreign investors, and have made certain efforts to remedy the situation. The authorities in the Skekou Industrial Area; for instance, have revised the charging standard for some 50 items, including the charges for long distance calls and apartment house management. The drop in the various charges averaged over 40%.
G.F. 326
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