TNAG-2980-FCO40-1472-British-investment-in-China-through-Hong-Kong-1982 — Page 7

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British Trade Commission in Hong Kong

Hammontoad Honork

Mail Address GPO Box No 528 Hong Kong

Telex HX 73031

Cable Address Uktrade Hong Kong Telephone 5-230176

9th Floor Bank of America Tower 12 Harcourt Road Hong Kong

Bw. Joger.

het is awart commenti from Peking before replyne to (1) тного

17

PJ Williamson Esq

HK & General Department

FCO

en Patrick,

My House

Your reference

Our reference

CECO 301/393/1

HIR 121/12

Date

8 July 1982

No

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17/8 Af/2

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Bu Aweeks 5

20/7

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2017

BRITISH INVESTMENT IN CHINA VIA HONG KONG

Thank you for your letter of 27 May seeking information on the extent of British investment in China via Hong Kong. This is a difficult one as no information is available in a readily accessible form. Because there is no requirement for British firms to notify such investments, the information given below comes from informal contacts with British companies here and from our reading of local press reports.

2.

I think you can take it that the amount of direct investment in China by British firms via Hong Kong is small. This reflects the general low level of interest on the part of British firms in investing in China. Some of the forms of trade currently practised in China, for example certain kinds of compensation trade, come close to investment. However, direct investment can be broken down into two main categories (a) full joint equity ventures with both partners supplying capital to establish an enterprise under China's joint venture legislation and (b) ad hoc cooperative ventures where the partners agree on a certain input in return for a fixed profit share usually over a limited period after which the project reverts to the Chinese.

3. Around 40 fully joint equity ventures have so far been established in China. While some of these involve Hong Kong companies none involve British companies working through Hong Kong. As regards co-operative ventures, these are far more numerous (running into thousands) and their scope is usually smaller than joint equity ventures. They are often small scale processing agreements and in general are dominated by companies from Hong Kong (according to most estimates Hong Kong companies account for over 80% of total foreign investment in China. We have been able to turn up two examples of a co-operative venture involving British companies either based here or working through subsidiaries.

4. The first is the Inchcape Group's involvement, through their trading arm Inchcape Far East Ltd, in a joint venture coach company running through services from Hong Kong to various parts of Guangdong province. Inchcape have a 25% share in the joint company, The Motor

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Every effort is made to ensure that the information given herein is accurate, but no legal responsibility is accepted for any errors or omissions in that information and no responsibility is accepted in regard to the standing of any firms, companies or individuals mentioned.