TNAG-1173-FCO40-1465-Future-of-Hong-Kong-special-study-by-FCO-for-the-Prime-Minis-1982 — Page 12

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the status, viability and attractiveness of such concessions is even less clear than joint ventures. But on the tentative assumption under (a) that the physical assets embodied in major HK enterprises passed into eg Chinese corporations the question would arise of the treatment of the liabilities attaching to those assets, particularly in so far as Chinese sovereignty led to changes in the economic and market conditions which had under- pinned the transactions in the first place. The question of whether and to what extent the Chinese would take over liabilities to non-HK parties would not be a theoretical one, however the Chinese thought sovereignty entitled them to act. It could not be in their interests either to act in such a way as to leave themselves with partly-completed projects, which foreign enterprises were not willing to carry on with in the absence of satisfactory agreements for continued financing (eg the Castle Peak B power station is not due for complete commissioning until 1990).

Bring

if not easy

10. The avoidance of complications like the above and the preservation of the current high Chinese credit status in the eyes of foreign lenders would, it can only be assumed, be easier

under option (b) if it meant effectively that HK economic and trading life was hardly or not at all disturbed and that HK physical assets remained in the hands of their owners or whoever they freely transferred them to.

11.

Direct Investment

As with other aspects of the HK economy,

quantification is less than ideal. The HK government has for long encouraged the inflow of foreign investment into manufacturing, for the skills, technology and overseas market networks it can bring. Overseas investment in HK manufacturing industry known to the HK Trade, Industry and Customs Department as at 30 June 1980 covered 482 establishments accounting for 83,108 employees and with a value on that "overseas investment of some $US 493mns: for the UK the figures are 37 establishments, and SUS31 mns (6.3% of total, exceeded by Japan's 22.6% and the US 42.3%). About 10% of the total manufacturing workforce was in these 482 establishments.

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