TNAG-2792-FCO40-4031-Relations-between-Hong-Kong-and-China-1993 — Page 169

Table 2.2 Provincial Development Weaknesses (cont'd)

Strengths

Training

Education levels are lower than in other parts of China.

Labour is often insufficiently skilled.

Labour is sometimes unused to the rigours of the free market.

English and foreign language skills are poor.

Any Spatial Implications and Other Comments

High-tech industries may prefer to locate elsewhere.

Industries may prefer to locate elsewhere - however, industry may also prefer to remain in the established industrial areas where skill levels are the highest

Locations close to Hong Kong are preferred - also Hong Kong people may have to be used to fill gaps (this is a particular problem in the service industries).

This restricts the type of risks people are prepared to make.

Trader mentality.

Rural Industrialisation

The Pearl River Delta is developing into a mega-urban area. A number of problems regarding governance and the appropriate controls on development in the region will soon require urgent attention.

Infrastructure planning needs to be regionally coordinated.

Insufficient Reforms in the Property Market

Lack of a proper legal framework for property transactions

There are inconsistent rules in the property markets - different areas have established different procedures and different reforms.

In many reas much land continues to be allocated according to the old marxist principles.

In many areas, housing is still the responsibility of employers.

Institutional

Weak Central Government control over macro-economic policy.

Most private businesses remain small

Prices for many of the materials used by state sector industries are still fixed centrally and have no relation to production costs

The state owned sector remains large - many state owned enterprises are loss making and need to be made more efficient

Laws on residence are restricting access to skilled and professional people

Restrictions on foreign travel are hindering liaison with overseas markets

Market for land remains undevelopped (except in Special Economic Zones)

Uncertain regulatory environment (rules often change)

Unclear hierarchy of Government authority (much overlapping of authority)

Political Uncertainty

A multi-sector approach to decision making is needed.

There is a large "black market" associated with property

transactions.

Investors are much confused by the regulations. They currently prefer Shenzhen, Zhuhai and Guangdong where reforms have been the most thorough and where the rules are most clear.

This land cannot easily be transferred to other users.

Employers have little incentive to improve the housing stock.

Credit controls to dampen inflation and an overheating economy may lead to a short term reduction in growth rates.

Overseas buyers must usually come to Guangdong - or the Province must rely on its Hong Kong joint venture partners to undertake the necessary promotion.

Many foreign entrepreneurs prefer to set up their businesses in the Special Economic Zones.

Political conditions remain uncertain. China has a history of policy reversais. Any future moves to greater democracy may lead to unsettled times and lack of business confidence.

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