TNAG-1458-FCO40-1982-Relations-between-Hong-Kong-and-China-1986 — Page 76

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CONFIDENTIAL # 3

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24.

According to a survey conducted by MOFERT, of the 2,300 equity joint venture projects approved at end 1985, only about one third are now actually in operation. MOFERT officials explain that this rather low figure was due to the fact that many of the projects had only recently been finalized. This disappointing figure appears to confirm the view that it is not easy to set up a joint venture in China.

25.

Notwithstanding the fact that a major aim of establishing joint ventures is to transfer foreign technology into China, MOFERT admits that little progress has been made in attracting high-technology projects. Moreover, there are very few projects in such key sectors

of the economy as transport and energy. It seems that few foreign investors in the high-technology industries consider China an attractive production base. In fact, despite repeated assurances from the Chinese authorities that China is committed to its open door policy, foreign investors remain cautious and reserved in making

investments in China. A breakdown of direct foreign investments in China by economic activity is given in

Annex IV Annex IV.

26.

As regards the financial situation of the joint

ventures, the MOFERT information seems to indicate a

brighter picture. According to MOFERT, 90% of the equity joint ventures made profits in 1985 and some showed very

(4) promising performance

Fewer than 10 equity joint

ventures had serious problems in their management, and only 4 were about to close.

(4)

However, it should be noted that as most of the profits are in Renminbi which is not freely convertible into foreign currencies, the foreign partners in practice cannot freely remit their profits out of China.

CONFIDENTIAL # 3