TNAG-2608-FCO40-3799-International-support-from-the-USA-regarding-the-future-of-H-1992 — Page 59

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PRC may have as much as $15 billion invested in Hong Kong;

Taiwan's investment in the PRC reached cumulative total of

around $3 billion in 1991, with two-way ("indirect") trade around

$5 billion; Taiwan's investment in Hong Kong is rising sharply

and Taiwan firms set up subsidiaries in the Territory to conduct

business and trade operations in the PRC in order to comply with

Taipei's policy of angaging in only "indirect" economic relations

with Beijing. To further complicate the picture, PRC state

bureaucracies and enterprises frequently set up subsidiaries in

Hong Kong so that they can reinvest in the mainland itself and

receive the tax and other investment incentives offered to

"foreign firms" by Beijing--these companies are called "fake

foreigners," a practice which local authorities on the mainland

apparently ignore.

From the perspective of American interests, the development

of the "Greater Chinese economy" (in which Hong Kong plays a

pivotal role) is important for at least four reasons: 1) First,

the Hong Kong economy is spreading rapidly into south China--

three million Chinese workers labor in Hong Kong-run enterprisas

in the PRC, four times more industrial workers than Hong Kong has

itself. These enterprises, their mode of management, and their

very ethos, is a critical agent of change in the PRC. I recently

drove by car from Guangzhou (Canton) to China's border with Hong

Kong. The visual appearance of that long corridor, and the

attitudes and values of the people living in that region,

reminded me of the booming Hong Kong in which I lived in 1972-