CONFIDENTIAL
8
(g)
Prospects of OP
Despite the
20.
problems mentioned in para. 18 above,
more than half of the 72 manufacturing establishments heavily engaged in OP activities in China will further expand their OP business due to the labour shortage problem in Hong Kong and the need to maintain price competitiveness of their products.
21.
Views of the
remaining manufacturing
establishments
are not
are mixed. Some hinge the expansion of OP on the political development in China. A few will not further expand OP at this moment simply because their production plants in China are operating in full swing and future expansions will depend on orders received. The others will not further expand OP since their overseas buyers lack confidence in the political stability of China and have fears over
over the possible disruption of supply from plants in China. In order to appease their overseas buyers, some manufacturing establishments have begun to search for alternative production sites in the SouthEast Asian region and future expansion in production capacities will probably be realized in places other than China.
22.
As regards the views of the 24 trading firms intervewed, about half of them consider OP activities in China will continue to grow for reasons described in paragraph 7 above. Moreover, the proportion of goods produced through OP in their total sales will increase as OP trade further expands.
(h) China's MFN status
23.
Some of the manufacturing establishments engaged in OP quote China's MFN status granted
granted by the one of the incentives for them to engage in OP.
heavily
US
as
CONFIDENTIAL
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