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SCMP Reporter

MAINLAND-backed Citic Pacific's surprise acquisition of a 20 per cent stake in China Light & Power for $16.25 billion has come as less of a shock to some seasoned China observers ahead of the handover in July.

  'The change of master usually leads to some changes of ownership in certain monopoly industries. I have been expecting this to happen,' Ma Guonan, senior economist at Bankers Trust, said.

  While media attention has focused on China's next corporate acquisition target, it is scarcely noticed that mainland money has been quietly, but strongly, changing the Hong Kong economy.

  According to government estimates that are corroborated by mainland figures, mainland companies, with combined investment of US$25 billion, are now the second largest foreign investor in Hong Kong after Britain.

  Mainland figures show there are about 1,802 wholly owned mainland-controlled enterprises with combined assets of more than $42.5 billion in Hong Kong.

  However, analysts say even those figures might not reflect the full picture of Chinese investment in Hong Kong.

  The actual figure is probably much higher, although even mainland officials can only speculate.

   Many local authorities or government departments have invested in Hong Kong without the knowledge of the Central Government, some having done so through a web of disguises employing offshore companies.

  A prime example is the property market, where nationality of ownership is often difficult to trace.

  Official mainland figures show that in most of Hong Kong's main service and trade sectors, mainland firms have already established a strong foothold.

  Bank of China Group's (BOC) assets account for about 12 per cent of the overall figure in Hong Kong, making it the second largest banking group after HSBC Holdings.

  Its deposits make up nearly a quarter of the total in Hong Kong, while its lending corners 7.8 per cent of the lending market. Insurance companies controlled by the mainland account for 21 per cent of the annual premium incomes in the industry.

  On foreign trade, mainland traders account for 22 per cent of Hong Kong's overall trade volume.

 Cosco HK Group and other Chinese companies handle about a quarter of overall annual freight traffic.

   Mainland tour operators account for 60 per cent of China-bound tourists and enjoy a monopoly of Chinese tours to Hong Kong. More than 10 mainland construction companies have been active in the territory, accounting for about 12 per cent of annual construction turnover.

  China Overseas boasts that one in every 20 local residents live in a building it has erected.

  On the Hong Kong stock exchange, red chips have increasingly become the most actively traded stocks.

 Together with state-owned H shares, the combined capitalisation of Chinese listed vehicles at the end of last year accounted for about 8.2 per cent of Hong Kong's total, according to investment bank ING Baring.

  While relatively small, that is still almost double the 4.5 per cent calculated less than two years ago.



Turning a deeper shade of red