LEADING liberal legislator Mr Martin Lee Chu-ming said he feared the investment firm led by China's Hongkong and Macau Affairs Office could use its political clout to manipulate the stock market. It was announced on Tuesday that the Hongkong-based New China Hongkong Corporation would be involved in China trade, infrastructure, broking and merchant banking. Thirty prominent Hongkong investors own 55 per cent, 13 mainland enterprises 32.5 per cent and the Trade Development Board of Singapore and a Singapore company 12.5 per cent. One of the 13 mainland companies, the Beijing Hongkong Development Company, is an investment arm of the Hongkong and Macau Affairs Office. Mr Lee said it would be easy for the company to make money in Hongkong. He said the company must have more insider information than others and this was unfair to other investors. ''Imagine the office has sold a large number of futures contracts in Hongkong. Yet the market goes up and does not fall. Will they make some statements which are detrimental to the local economy so as to achieve their aim of a market slump?'' he asked. Mr Lee said experience showed they definitely had the power to do so. Saying it was the first time that the mainland Government had entered the Hongkong market, he said: ''We couldn't help asking whether this would create a new breed of pro-China investors and whether this will adversely affect the interests of other investors?'' He said although it was common in China for the Government to participate in economic activities, this never happened in Hongkong. ''The People's Liberation Army even operates hotels and entertainment businesses in some economically open cities . . . But in Hongkong, this will never happen. The Royal Hongkong Police can never run nightclubs. Government departments also cannot open shops and make investments.'' He also warned that to implement the principle of one country, two systems, Hongkong should never import the mainland's economic practices as this would lessen the confidence of local and foreign investors. But Legco member Mr Ngai Shiu-kit disagreed that the setting up of the New China Hongkong Corporation would affect fair trade in the territory. ''Our trading environment will not be affected by China's investment in Hongkong,'' said Mr Ngai, who is the Legco representative of the Chinese Manufacturers' Association. Mr Ngai said other governments, like that of Singapore, were also involved in their countries' economic activities. Mr Chim Pui-chung also criticised Mr Lee for making an unfair comment about the company. ''In many places in the world, many firms are owned by the state,'' he said. He claimed that, in fact, there was no fair trade in the territory. ''Apart from the several monopolies, the Government also looks after large British firms,'' he said. He said many representatives of these large firms were also appointed to Exco. ''There is nothing known as fairness in the world,'' he said. A Hongkong affairs adviser, Mr David Chu Yu-lin, last week wrote a letter to Mr Lu Ping, director of the office, and Mr Zhou Nan, director of the local branch of the New China News Agency, to criticise the office's investment in Hongkong business. Mr Chu yesterday said the main problem was conflict of interest as the office was in charge of Hongkong affairs. ''In my letter, I expressed my displeasure to the office's economic activities in Hongkong. In principle, it is not good for the office to have shares in any Hongkong company,'' he said. ''I also criticised the office's choice of partners in my letter,'' he added. But Mr Chu said he could understand why the office decided to engage in business as it needed to generate funds for its operation. ''But in view of the very small size of its shares in the company, I can live with this. From the office's point of view, it did not set up the company to gain special advantages,'' he said. ''If I know the office uses its shares in the company to gain special interests in Hongkong, I will write to higher authorities in Beijing to complain against this,'' he said.