TNAG-1847-FCO40-2622-House-of-Commons-Select-Committee-on-Foreign-Affairs-enquiry-1989 — Page 92

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6. Some detail of direct net investment from Britain in Hong Kong is published every three years in a world wide review of British investment prepared by the Department of Trade and Industry. The latest review was for 1984. At that time the total figure for direct net investment from Britain in Hong Kong was £1,538m. This was investment that gave the UK investor an effective voice in the management of the enterprise; it did not include portfolio investment. Successive DTI reviews have shown that the value of British investment in Hong Kong increased slowly up to 1971 (when it was £47m). In the next three years it trebled; in each of the next three year periods it doubled. Hong Kong now takes the largest proportion of Britain's investment in Asia. The pattern of new British investment in Hong Kong, Singapore and Malaysia in each of the years 1984, 85 and 86 was:

1984 1985 1986

HONG KONG

SINGAPORE

MALAYSIA

£42m £91m £176m

£200m £5m £47m

£107m

£31m (£43m)

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7.

The reviews produced by the DTI cover investment in all sectors of the economy including financial and other services. The only foreign investment figures available from the Hong Kong authorities are for the manufacturing sector. In the absence of more extensive local information, these manufacturing figures have often been misread as total investment in all sectors. This has led to considerable misunderstanding. Generally, British companies have invested less in the manufacturing sector and more elsewhere in the economy. At the end of 1986 British companies accounted for 7.8 percent (at book value) of the foreign-held fixed assets in manufacturing. However total British investment throughout the economy was a much greater proportion than this.

8.

Even within the manufacturing sector, the local figures have not given a comprehensive picture of British involvement. They have not included all the investment made through locally-incorporated companies. As most British companies operating in Hong Kong choose to incorporate here, this has meant that much of their investment and that of their subsidiaries has not appeared as British. For example, almost all the investment of the Swire Group in Hong Kong is made through Swire Pacific or its other subsidiaries and has not shown up as a British (or part-British) investment.

9.

It is sometimes suggested that there has been little new investment from Britain in recent years. The details at para 6 show this is not so. In the last year there has been significant activity including aquisitions by the Beazer Group and by Polypeck International; P & O are looking for new opportunities in Hong Kong. In manufacturing, Technophone will soon begin producing mobile telephones at a local plant; and new ventures have included one by Pilkington. Further evidence of British activity has been the opening in the last two years of about 12 new retail stores. Reinvestment by existing British companies has been considerable and is continuing at a high level. The Swire Group capital investment in 1987 was about £270m. Hong Kong Telecom has plans for £230m of investment in 1989; Shell will be making a large investment to move its storage facility.

10. None of the figures mentioned so far, include the extensive British investment in Hong Kong equities where no management or control is involved. It is thought that British portfolio investment accounts for 30-40 percent of the total market capitalisation of listed companies in Hong Kong.

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