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NEARLY 200 Hong Kong companies have been identified as being linked to the PLA or Chinese defence industries in a Sunday Morning Post investigation.

 And experts predict a rise in the number of mainland groups with military or aerospace connections - as well as those in supporting industries - opening 'window' companies in the SAR.

 The links of PLA Inc and defence and aerospace conglomerates run deep into corporate Hong Kong, giving them access to international markets and technology.

 The vast majority are involved in a wide range of legitimate businesses ranging from property, finance and investment to Chinese medicines, computers and electronics.

 But experts said the few involved in arms dealing or acquiring sensitive Western technology could endanger Hong Kong's reputation.

 A survey of company records showed four listed companies with defence industry ties - Poly Investments Holdings, Continental Mariner Investment, Po Wing Kwan International and China Aerospace International Holdings - had links to 171 Hong Kong companies.

 As well as the subsidiaries and associated companies listed in annual reports, they included firms identified in the Companies Registry with two or more directors from the four listed companies.

 Another 16 companies were identified as having links to the PLA's San Jiu or Xinxing groups and Norinco.

 One source said the Hong Kong Government had identified about 200 companies linked to Chinese defence industry organisations, and a Western consulate found 400 firms. James Mulvenon, a consultant at the Rand Corporation think-tank which provides advice to the US Government, said: 'Over time, I expect the number of companies in Hong Kong to increase, given Chinese rule, but Beijing is also very sensitive to the perception that the PLA is running wild in Hong Kong.'  An expert in defence industry organisations, Dr John Frankenstein, said any increase in operations in Hong Kong would be slight.

 'My sense is that in the run-up to the '97 transition, Beijing didn't want a flood of mainland companies rushing to set up in Hong Kong,' Dr Frankenstein said.

 'Those restrictions are, I strongly suspect, still in place.'  Corporations establishing 'window' companies were generally in the process of converting assets and technology to civilian use and needed to do market research, marketing and purchasing.

 'One can only suppose that they have been used for other things like parking money or people overseas,' Dr Frankenstein said.

 Military analysts said they had found no evidence the PLA Garrison was engaging in business in the SAR.

 The opening of a formal Norinco presence is the latest in a series of moves across the border.

 Among directors of Norinco's China North Industries Investment - listed on Singapore and Dublin stock exchanges to plough funds into motor vehicle, building materials and optical industries - is high profile businessman Simon Murray, a close friend of former Governor Chris Patten.

 An executive at China Aerospace International Holdings' (CASIL) Hong Kong headquarters, Liu Chaoying, is alleged to have sought influence over United States satellite launch policy with a US$100,000 (HK$774,000) donation to America's Democratic Party.

 Ms Liu, the daughter of a powerful general and believed to have held rank as a PLA officer, denied the allegation that was made by disgraced fund-raiser Johnny Chung.

 Beijing's efforts to gain access to highly sensitive Western technology as part of its military and economic modernisation drive has raised debate in the US about Washington's China policy.

 CASIL is working closely with the American company Iridium, which is spanning the globe with low-flying satellites for mobile telephone users, in a project likely to give it access to high-technology. It also fires the Long March rockets used to launch satellites.

 Three directors of the Chinese state-owned enterprise subsidiary sit on the board of Iridium China (HK) Ltd.

 The Sanjiang Space Group, from Hubei province and under the control of China Aerospace Corporation, opened an office in the SAR last month.

 On the stock exchange are big companies linked to the PLA, such as Poly Investments Holdings and Continental Mariner Investment Company, which manufacture chemical fibres among other activities.

 Vice-president of both companies is He Ping, who has held the rank of major-general and is Deng Xiaoping's son-in-law.

 After the seizure of 2,000 AK-47 rifles in the US in May last year and Washington's accusation that they were sold by Norinco and Poly Group in China, rumours circulated that the US claim had indirectly led to the resignation of Mr He from the PLA's armaments department.

 The predecessor of another listed-company, Po Wing Kwan International (Holdings) Ltd, was Hong Kong Macau International (Holdings), which defence analysts said was connected to the PLA's Carrie Enterprises.



Mainland's military links run deep