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SCMP Reporter

WHILE measures to control China's economy are taking their toll, foreign investment in the services and retail sectors has remained on track.

  Sales of imported electrical appliances have been declining since vice-premier Zhu Rongji took steps to bring down inflation and stabilise the yuan.

  The fledgling car industry has also been hit by tighter credit and a ban on institutional purchases. Sluggish car sales have been reported for the past three months.

  But in Beijing, foreign retailers are pressing ahead with plans to expand, despite the slowdown in economic growth expected to result from the Government's austerity programme.

  Meanwhile, Dickson Concepts, a Hong Kong-listed up-market retailer, will open stores in both Guangzhou and Shenzhen this month.

  And a 100,000-square foot department store in Shanghai is expected to open at the end of the year.

  Dickson Concepts opened its first mainland store in Beijing in May. Two more in the same city soon followed.

  The company aims to open 31 luxury-goods outlets and two department stores over the next six months.

 Mabel Au, the district sales manager of Dickson Concepts' China trade division, said the spending power of mainland consumers could not be under-estimated.

  Turnover at the store in the Palace Hotel had reached as much as one million yuan (about HK$1.34 million) in one day, while 500,000 yuan was not unusual.

  The store stocks goods with such famous brand-names as Chopard, Bulgari, Audemars Piguet, S.T. Dupont, Hermes, Sonia Rykiel, Charles Jourdan, Guy Laroche and Carrera.

  Miss Au said there were customers, many of them self-employed businessmen, who could afford to visit the stores every month to buy expensive watches.

  One day, an unremarkable-looking man had come into the Palace Hotel store and asked the price of a watch he liked. On being told 150,000 yuan, he had disappeared - only to return swiftly with a paper bag full of banknotes. All were 10-yuan notes, except for 300 100-yuan notes.

  ''It took us half an hour to count the money,'' said Miss Au. ''He was about 30 years old. But we had no idea who he was because he declined to give us his business card.

  ''I keep telling our sales girls not to judge the purchasing power of a customer by his or her appearance.''   Miss Au said mainlanders had very differing spending habits from Hong Kongers. For example, one of her mainland executives spent 80 per cent of his salary on clothes.

  The senior director of the Trade Development Council's Beijing office, Stephen Mak, said the capital would continue to be an attractive market because it was a political and cultural centre with many visitors throughout the year.

  He suggested that Hong Kong businessmen look at the city's garment, processed food and gift markets.

  Hong Kong-designed fashion would continue to be popular in China as the domestic industry was still way behind.

  Mr Mak said gift items, such as stationery and electronic goods, would be a growth area.

  ''Sending gifts is a common practice in China, and those priced between 100 yuan and 200 yuan are most popular.

  ''And it would be better if some element of new technology is incorporated because it would make the products more difficult for mainland businessmen to copy.''    Hong Kong businessmen are also venturing into the entertainment business, the rules of which are sometimes unclear.

  The New World hotel group and Kumagai have teamed up to launch Catwalk, an entertainment centre at Jingang Centre that includes a night club, disco and gaming-machine and bridge rooms.

  Well-known mainland models will be brought to the club to boost its appeal.

  The $50 million club will have to compete for foreign customers with several others already operating.

  But managers expect the club to recover its investment in three to five years if China's economic growth continues at its current pace.

   Fast-food giant McDonald's has three shops in Beijing and plans to open a fourth this month.

  There are plans for three more in Beijing and two in nearby Tianjin next year.

  Tim Lai, the managing director of Beijing McDonald's Food Co, said the city's fast-food market was far from saturated.

  His view was shared by Grace Ren, of Kentucky Fried Chicken (KFC) Beijing, which has six shops in the city.

  KFC will open another shop next month and three more next year, while Beijing businessmen and former employees are starting their own versions of the KFC concept.

  The TDC's Mr Mak said the high degree of competition would make it more difficult for Hong Kong businessmen to set up restaurants.

  But the market for processed food still had huge potential.



Austerity drive shrugged off