China’s New Plan to Boost HK Economy

BEIJING - China announced a slew of preferential measures to Hongkong this week that promises to forge closer links and boost the territory's ailing economy.

Even before China joins the World Trade Organisation and opens its market to foreigners, Hongkongers were told this week they would get priority to set up pilot projects in fields now prohibited to foreign investors.

But some analysts have argued that Hongkong should not look to these projects for an immediate boost to its economy - whose growth forecast for this year was slashed to 1 per cent - and to alleviate its jobless rate that is expected to rise to 6 per cent next year.

Beijing Mayor Liu Qi on Tuesday announced six incentives to reach out to Hongkong money to develop 377 projects worth US$13.7 billion (S$25 billion).

Stadiums, roads and environmental protection projects are being held out as money-spinners in a bid to help Beijing ready its infrastructure for the 2008 Olympics.

Beijing's incentives include giving local status to joint ventures between Hongkong and Chinese firms, offering such businesses preferential bank lending rates as low as 3 per cent, compared to the 6 per cent to 7 per cent given to Sino-foreign ventures.

Hongkong professionals from the trade, tourism and service sectors would also be invited for work stints in Beijing government departments and institutions - a form of skills transfer that could boost service standards in the Chinese capital, which is increasingly reliant on tourism and the goods and services sectors to grow.

Beijing's announcement follows a series of earlier moves designed to boost the flow of money and consumers between both sides.

In July, Hongkong and the southern Chinese province of Guangdong agreed to smooth out traffic flowing across their border by extending opening hours at the Lowu boundary checkpoint to allow in more mainland shoppers to the territory.

In the same month, Hongkong signed a deal to help develop Nansha, situated along the Pearl River Delta, as a base for high-tech industries, transport and logistic services.

By June this year Hongkong investors had established 6,126 projects in the capital from contracts worth US$15.5 billion, mainly in real estate, manufacturing and telecommunications.

These measures promised to open up China as an economic hinterland to a territory that had only 6 million residents, analysts said.

But the gains would come in the long term, they noted, so Hongkong should not hope for fast relief to its economic problems.

Said Hongkong-based China analyst Tony Wong: 'In the next year, Hongkong must still count on a global economic recovery to get its act together.

'But in the next decade, Hongkong is lucky enough to have China's massive market for consumers, investment opportunities and even jobs if Hongkongers are willing to lower their expectations.'

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AREAS OF COOPERATION

In Beijing

A Hongkong-Beijing communications organisation will be developed to promote joint business development.

Tourism initiatives will be drawn up to entice Beijingers to visit Hongkong.

In Guangdong

Hongkong and Guangdong have extended opening hours at the Lowu borders so that more mainlanders can shop in the territory.

In the Pearl River Delta

Hongkong signed a deal in July to develop Nansha, along the delta, as a base for China's high-tech industries, transport and logistic services. --Jason Leow