HONGKONG must maintain high-quality infrastructure and telecommunications systems to head off the relocation of service industries to China. In its January edition, the Hang Seng Economic Monthly investigates the possibility of the territory's much valued services industries moving north, like their manufacturing counterparts. It concludes that Hongkong's future as a service centre remains bright because the factors behind the move by manufacturers, primarily motivated by cost savings, do not apply to services. The bank states that the exodus of Hongkong manufacturing during the 1980s will not be followed by the service sector. Unlike manufacturing, service industries tend to be highly sophisticated in their operation, requiring professional staff and high quality communications infrastructure to even begin to emerge. Despite the rising costs of labour and office rentals and relatively high inflation, Hongkong's skilled people, good communications and infrastructure mean there is less potential for a northern movement of this industry. Furthermore, the service industry is about people communicating directly. Hongkong's entrepot status means the goods, the business and the people behind them converge on one point. It is not practical to operate services-orientated departments from Guangdong as the point of first contact has always tended to be Hongkong. Those companies that do relocate their services north will tend to be large groups intent on moving office functions out of the high-cost environment of Hongkong. The economies of scale in such moves are limited. The companies able to benefit from such changes will be confined to a handful of conglomerates in the territory. Between 1980 and 1990, the average annual rate of nominal output from the services sector - comprising wholesale and retail, transport, finance and community services - was 16.5 per cent, compared with 15.5 per cent for the rest of the economy. In employment terms, it has risen from employing 43 per cent of the total workforce to 62 per cent over the same period. But per capita output rose at an average rate of only 2.4 per cent compared with a rise of 9.4 per cent in the manufacturing sector. That is because the service sector is labour intensive and difficult to automate. In China, the bank points out, the lack of highly skilled professionals with good English-language skills will also hinder the relocation of services. Unlike manufacturing jobs, which are relatively simple and easy to learn, services employees require more sophisticated skills, the bank says. The costs of ensuring that mainland service operations are of high standards are probably proportionately higher than bringing a manufacturing unit up to international standards. The level of training required to bring together service functions in China will be long and intensive, requiring large numbers of Hongkong-based supervisors during the initial stages. The bank warns, however, that the pressures on costs in Hongkong are unlikely to ease in the near future and therefore the potential for the services industry to relocate will remain an ever-present threat.