TNAG-1623-FCO40-2237-Relations-between-Hong-Kong-and-China-1987 — Page 173

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requirement to obtain import licences in respect of

machinery, equipment and parts imported for the purpose of

production for export.

18.

The Chinese authorities clearly hope that the

above measures will boost the inflow of direct foreign

investment, which showed signs of slowing down in 1986.

In terms of numbers, China was involved in 870 additional

equity joint ventures and 560 additional co-operative joint ventures in 1986. These figures represent substantial declines over 1985, when there were

additional 1 369 equity joint ventures and 3 140

co-operative joint ventures. In terms of pledged

investment (which serves as an indicator of investment

intentions), direct foreign investment, including that for compensation trade, totalled US$3.3 billion in 1986,

compared with US$6.3 billion in 1985. On the other hand,

reflecting the commencement of works relating to the large

number of projects agreed on in 1984 and 1985, the amount

of realised investment increased by 10% over 1985, to

US$2.16 billion in 1986.

19.

To a large extent, the decline in pledged

foreign investment in 1986 was related to China's renewed

emphasis on the the need for Sino-foreign joint ventures

and wholly foreign-owned enterprises to balance their own

foreign exchange accounts. China's wish to commit fewer

resources to service-related activities like hotels was

also a contributory factor. With the extension of the

preferential treatment for foreign enterprises and joint ventures and with the greater scope for import

substitution permitted in the twenty-two new provisions and in other local regulations, the general investment climate in China is expected to improve. On the other

hand, despite reassurances that China's policies towards

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