DESPITE THE unprecedented efforts of Hong Kong's supposedly laissez-faire Government to convince local entrepreneurs to 'Go West' and develop China's interior provinces, Hong Kong investment on the mainland remains deeply rooted in the Pearl River Delta.
The tycoons and their silver-spoon offspring who accompanied Hong Kong Chief Secretary for Administration Donald Tsang Yam-kuen on his recent tour of Xian, Chengdu and Urumqi could not have been less representative of the average Hong Kong investor on the mainland.
According to a May 2000 Hong Kong Trade Development Council (HKTDC) survey of 1,344 Hong Kong-invested companies on the mainland, the typical SAR-funded enterprise is a labour-intensive, export-processing operation based in the Pearl River Delta with an annual turnover of less than US$30 million. Export-processing operations are simpler to establish than either wholly foreign-owned enterprises or joint ventures and are allowed to import their machinery and raw materials duty-free as long as everything they produce is exported. But because such operations are not recognised as legal persons on the mainland, their owners usually can obtain financing only by mortgaging Hong Kong-based assets.
Such small and medium-sized enterprises have led the surge of Hong Kong investment on the mainland for about 20 years. As of the end of last year, Hong Kong investors accounted for 53 per cent of the 364,345 foreign-funded projects on the mainland.
They also contributed US$170.3 billion, or 49 per cent, of the US$347.6 billion in utilised foreign direct investment that China has accumulated since its economy was opened to the outside world in 1978. The Hong Kong Government estimates that there are about 157,000 Hong Kong residents living and working on the mainland, most of them in the Pearl River Delta.
But for all the impressive numbers, there was nothing complicated about the migration of Hong Kong capital to the mainland. After 1949, industrialists transformed Hong Kong into a key exporter of cheap goods by exploiting the refugee labour they received courtesy of, ironically, Mao Zedong's excesses such as the Great Leap Forward and the Cultural Revolution.