Annex III
Research Report
on Hong Kong Companies with a Production Base in China
Background
As a normal practice, the Community Relations Department (CRD) of the ICAC would conduct market research on a certain subject before deciding on what should be done on preventive education.
2.
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In recent years there has been an increasing number of Hong Kong companies setting up a production base in China. During liaison contacts, staff of CRD often come across concern expressed by operators of these companies about whether there is possibility that any part of their cross border activities any infringe the anti-corruption laws in Hong Kong. The CRD is therefore interested to know more about these types of business activities before deciding on what preventive education advice and services it can provide to this category of businessman in as far as the anti-corruption laws in Hong Kong are concerned. It was for this purpose that the CRD commissioned the research.
3.
The report was the result of desk research work supplemented by a questionnaire survey of 50 Hong Kong companies which have a production base in China. The questionnaires were sent to 162 firms. Upon the return of
50 questionnaires, telephone interviews were conducted on these companies' attitudes and opinions.
Main Findings
1.
In 1991, 25.3% of the total foreign investment in China came from Hong Kong. Hong Kong accounted for over 85% of the foreign investment in Guangdong in terms of number of firms (around 14,000), number of employees (about 2 million) and capital invested in manufacturing (mainly electronics, toys, textiles and clothing), followed by property development. However, developments in 1992 and 1993 reflect that property development, finance and servicing industries have been picking up rapidly."
5.
In general, businessmen maintain tight management control at the Hong Kong end. It
is common that only the production base is moved to China to make good use of the cheap labour there.
6.
Hong Kong businessmen investing abroad (including China) are not familiar with local government regulations and procedures in seeking approvals, land/quota acquisitions, applications for the supply of utilities, and customs clearance.
7.
They face the cultural difference that people in China take "guanxi" (personal relations) as essential and normal. It is commonly recognised as a means to get things done. Hong Kong businessmen often have to rely on personal friendship and offers of "gifts", including cash and, in some cases, deposits in Hong Kong bank accounts.
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