C.F. 326
CONFIDENTIAL #3
19
Implications for Hong Kong the possibility of Guangdong becoming a serious competitor
31.
(a) Short to medium term future
There have been suggestions that the movement of capital and of some manufacturing operations into Guangdong is not necessarily in Hong Kong's best interests. Investment in Guangdong is seen by some as
The creation of investment diverted away from Hong Kong. manufacturing jobs in Guangdong through outward-processing and compensation trade arrangements and joint ventures is seen as, in effect, exporting jobs and thus reducing job opportunities in Hong Kong. And finally, it is claimed by some that the long-term implications for Hong Kong of these developments are much less favourable than the obvious short-term gains would suggest.
32.
As
From a short-term perspective such fears seem misplaced. Investment spending in Hong Kong in 1986 and 1987 was at an all-time high and was growing rapidly. during previous export booms, investment in industrial machinery for use in the manufacturing sector surged; by 26% and 18% in real terms in 1986 and 1987 respectively. Admittedly, whatever the figures, investment in Hong Kong could always have been higher, but on these figures it is hard to make a case that there has been a significant diversion of investment from Hong Kong to Guangdong. the contrary, at the same time as investment in Guangdong was growing, there seems to have been a considerable effort to install new labour-saving machinery in Hong Kong as an alternative to moving production into Guangdong.
33.
On
As regards employment, there are again few signs that expansion into Guangdong has seriously reduced job opportunities in Hong Kong.
Overall unemployment has been
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