Despite enduring a change in sovereignty in 1997, Hong Kong companies are due to be treated as foreign investors in China.
This arrangement was made plain last month by Xiang Huaicheng, deputy director of China's National Tax Administration.
In April, Yu Xiaosong, deputy-director of the Economic and Trade Commission under the State Council, confirmed this position.
He said the Joint Declaration was clear on Hong Kong being maintained as an independent tariff zone in international trade. The espousal of this arrangement requires discussion, say researchers at Political & Economic Risk Consultancy.
Being treated as a foreign investor in China, in future, will actually hold few attractions should the World Trade Organisation get its way.
In the meantime, Hong Kong companies, as foreign investors, will be banned from entering domestic mainland banking, securities broking, yuan currency dealing, airlines business, fund management, investment banking, newsprint media and telecommunications. This affects more than a third of the Hang Seng Index, by market capitalisation weighting, or about 20 per cent excluding HSBC.
The risk consultancy suggests several companies, including Hongkong Telecom and Cathay Pacific Airways, are poorly positioned to weather the 1997 transition.
