XN000022-1981-11-17 — Page 15

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Opportunities for our entrepreneurs, and problems for our lawyers and

accountants. It is clear that the present Chinese administration at the highest level is determined that investment in China whether in equity joint ventures or in lesser forms of joint undertakings should

succeed. It is true that there is not any substantial body of recent

precedent for outside investment in China. And it is also true that for many years most businessmen and their professional advisers in Hong Kong have been concerned with the commercial practice, law, and

other requirements of Europe and North America rather than China.

Nevertheless the strong backing for the new development at the highest

level does mean that investors should be able to secure agreement to any workable proposal which promises profit to both sides.

Let me quote two examples, at opposite ends of the industrial

spectrum, by way of illustration. The largest of the twenty-nine

equity joint ventures so far established in China by Hong Kong firms

is the China-Sohindler Elevator Company with factories in Peking and

Shanghai. Some of the lifts produced by this joint venture have

already been sold here in Hong Kong.

At the other end of the scale, an enterprising individual

has set up a factory in the Shenzhen special economic zone to produce

artificial flies for trout and salmon fishing. A pretty improbable

idea on the face of it: but in practice it has turned out to be a very

good one. The work force in Shenzhen has taken to fly tying with efficiency, and the low overheads have made the project viable.

In both these cases, those involved pressed ahead in spite

of the lack of precise legal definitions of what their rights would be

in setting up such ventures. Olina's laws on foreign investment and in particular on joint venture taxation are not yet fully developed.

The same applies to the regulations governing compensation trade,

Cooperative production and part-processing agreements. So these enterprises must be based on mutual trust, rather than enforceable

contract.

I am glad that so many entrepreneurs have been willing to

accept terms of this sort, and some 700 ventures in the special

economic zones at Shenzhen, Zhuhai, Swatow and Amoy have already been

established. The vast majority of these are in Shenzhen, but there are

of course many more larger enterprises in other parts of China. We

/greatly value .......