TNAG-1370-FCO40-1816-Relations-between-Hong-Kong-and-China-1985 — Page 57

CONFIDENTIAL #3

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19.

Hong Kong's investment in the SSEZ is mainly in manufacturing, property, and tourist facilities. There are at least 700 investment projects and many more contractual agreements on outward processing by Hong Kong

industrialists in the SSEZ alone. A large number of these

are subcontracting arrangements whereby certain

manufacturing processes are performed in Shenzhen and the

rest in Hong Kong. These projects range from textiles and

clothing through electronics, toys and other consumer

items, to a steel rolling mill and food and beverage

production. However, it is a fair comment that most

industrial establishments in the SSEZ are labour intensive

rather than technology or skill intensive and are in many

cases little more than the outward processing plants of

companies based in Hong Kong. Besides manufacturing, the

construction of many commercial and residential buildings

including hotels has been financed by Hong Kong investors.

20.

(b) China's investments in Hong Kong

In recent years, besides stepping up activities

in those areas where they traditionally had interests,

PRC-based companies have also moved into property, finance

(such as stocks, shares, gold, and foreign exchange), and

manufacturing which they had, for one reason or another,

previously refrained from entering. According to an

informal report, the PRC invested as much as US$4 billion

in Hong Kong during the five years 1979 to 1983. This

investment was undertaken by 50 PRC trade and

representative offices in Hong Kong and more than 300

projects were involved. In 1984 and the first half of

1985, it appears that China's investment in Hong Kong has

become increasingly more diversified.

CONFIDENTIAL #5