THE People's Liberation Army (PLA) is almost certain to set up some form of business venture in Hong Kong after Beijing resumes sovereignty in 1997, according to a leading Chinese military expert. Speaking during a Hong Kong conference on ''Chinese Economic Reform: The Impact On Security Policy'', the academic said it was inevitable that the PLA would start ''economic activities''. Dr Gerald Segal, a senior research fellow at the International Institute for Strategic Studies (IISS) in London, stated the PLA was likely to become involved in the service industry, possibly in the form of hotels. ''There is no question they will be involved in a major way in business enterprises here,'' said Dr Segal, who chaired the conference. ''They would be using the land and resources that they have to engage in that kind of activity. They have been involved in everything from ice cream to high technology, but it could be as broad as anything else they want to do.'' Ellis Joffe, Professor of Chinese Studies at the Hebrew University of Jerusalem, who gave a paper on ''The PLA And The Economy: The Effects Of Involvement'', argued that this ''one army, two systems'' will be detrimental to China in the long term. ''The PLA is extensively involved in a variety of activities for profit-making,'' Professor Joffe said. ''And while this has a beneficial effect in the short run, I think that the potential consequences for [military] capability, internal cohesion and relation to population are negative. ''But the leadership hasn't done anything about it yet because at the moment the benefits outweigh the dangers.'' In his paper, Professor Joffe states that according to PLA officials there are about 1,000 companies operated by the army in Guangdong, although other estimates put it at five times that number. ''In 1990, such enterprises were said to have produced 3.3 million yuan's [HK$2.95 million] worth of civilian products,'' he said. The two-day conference was organised by the IISS and the Chinese Council of Advanced Policy Studies, from Taiwan.