G.F. 326
2
除
3.
The inflow of Hong Kong capital into China
showed particularly sharp increases in the last two years
(1984 and 1985). The impressive investment figures, however, should not lead one to conclude that investing in China is 'plain sailing'. Quite the opposite, complaints
by Hong Kong investors about institutional barriers and infrastructural inadequacy in China are common. The worries of the investors seem to have intensified recently as stringent controls have been imposed by China on
foreign exchange spending since April 1985. As part of China's austerity programme, the volume of foreign exchange loans and credits extended to foreign ventures by the Bank of China or other approved financial institutions
have been drastically reduced. The requirement for
foreign ventures to be self-sufficient in foreign exchange
has been re-emphasized. Approvals for the setting up of these joint ventures are now also subject to more stringent scrutiny. Probably reflecting this, the volume
of direct foreign investment pledged in the first half of
1986, at US$1.24 billion, was 20% lower than in the same
period last year.
4.
This paper attempts to give a fairly detailed
account of the problems facing foreign investors in
China. The focus is placed on Sino-foreign joint ventures
because this form of investment involves more intensive
and longer term relations between the foreign partners and
the Chinese partners, and because pooling of assets, sharing of risks and profits as well as joint management are often required. Before discussing the problems, a
brief background description of China's objectives in setting up joint ventures, the general business environment in China, and the growth and development of
joint ventures since 1979 is given. In the concluding
section, an attempt is made to identify areas where
improvements can be made through the joint efforts of the
Chinese government and foreign investors.
CONFIDENTIAL # 3
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