TNAG-1621-FCO40-2235-Relations-between-Hong-Kong-and-China-1987 — Page 92

G.F. 326

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63.

Besides providing China with infrastructural

services such as transport and communications, Hong Kong is also supplying China with a wide range of financial,

professional, technical and advisory services. Over time

China will attempt to develop such services domestically.

However, in view of the enormous shortfall at present in

China's ability to supply such services and the limited

specialised training resources available, Hong Kong's role

in these areas is likely to remain prominent even in the

longer term. Bi- and trilingualism in the Hong Kong community is a distinct advantage in this respect, as it

helps to eliminate communication problems between

businessmen in China and those from elsewhere.

(e) Hong Kong as an investor in China

64.

In the longer term, Hong Kong's investment in

China is likely to increase in absolute terms, but may

decline in relative importance as China becomes more

successful in attracting investment from other sources. Recently it was reported that China will shortly introduce a number of reform measures to improve business conditions

for foreign investors. However, radical changes are not

expected, as China will remain very cautious in the

fundamental areas of foreign exchange control and wage

policy, which pose the greatest difficulty to foreign

investors. The longer term worry about the possible

diversion of investment to China at the expense of Hong

Kong is probably more apparent than real. The amount of

funds available for investment in Hong Kong has, in recent

years, exceeded what can be absorbed by the investment

opportunities available locally, although the range of

viable opportunities may itself be limited by the opening

up of alternative opportunities in China. Despite a

CONFIDENTIAL # 3