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Abstract
The sovereignty transfer of Hong Kong to China in 1997 has inevitably affected perceptions of entrepreneurs and local business executives/managers towards the investment climate and investment strategies. Business Views remain quite optimistic through the year 2000. But, a modest amount of risk premium has been incorporated in computing the expected rate of return and in designing the firm's investment strategies. In the year 2000, increasing concerns were shown towards government bureaucracy and political climate in Hong Kong.
I. Introduction
The open door policy and economic reform adopted by the Chinese Government since the late 1970's induced a heavy flow of direct foreign investment (DFI) amounting to US$24.2 billion into mainland China, especially to Guangdong for the period of 1979-91. The heavy outward DFI from Hong Kong to China has played a crucial role in the evolution of the Hong Kong's manufacturing sector. Other than a major factor contributing to the continued economic expansion in both regions, the outward DFI and cross border operations being also accessible for even smaller businesses and entrepreneurs have affected manufacturing production activities, manufacturing export composition, and economic structure and industrial readjustment in the economy of Hong Kong.
The Sino-British Accord in 1984 to agree on the return of Hong Kong to China in 1997 contributed a politically sensitive economic environment and an uncertain political climate. The manufacturing evolution under a 'passive industrial policy' (Tuan & Ng, 1995c) with the current development in cross-border operations and induced outward processing trade leading to the recent economic restructuring of the economy, have also made the investment environment of Hong Kong, especially after that of 1997 a particular concern. As a small open economy subject to external disturbance, the changing economic and political environment of Hong Kong in view of the transfer in sovereignty should be also of crucial interest to entrepreneurs, investors, and executives/managers.
This paper thus aims (1) to study the major factors affecting the investment environment in Hong Kong during the pre- and post-1997 period, (2) to evaluate factors affecting Hong Kong as an operational base in general, and in particular, the banking sector, (3) to assess the investment environment for both manufacturing and services in the Year 2000, and (4) to investigate the investment strategic directions and management...