The role of Hong Kong as financier is briefly surveyed in Chapter 2 with particular reference to foreign investment and loans. This chapter analyses this aspect in greater detail and also examines Hong Kong's contribution to the development of financial expertise and financial markets in China. In addition, this chapter studies the link between Hong Kong investment and the development of export industries in China, particularly in the Pearl River delta in Guangdong.

Foreign loans

According to Chinese statistics (presented in Chapter 2), Hong Kong is the predominant source of foreign investment in China, but Hong Kong's share in total contracted loans was only 5 per cent in 1987 (Table 2.2). China's statistics, however, grossly understate the contribution of Hong Kong for two reasons. First, as is mentioned in Chapter 2, Hong Kong is the major centre of loan syndication to China. It is very difficult to trace the source of funds for such loans and the funds may not come entirely from Hong Kong banks. Second, Hong Kong banks also lend to foreign enterprises in China, and such loans are not recorded in China's statistics unless the Chinese government is involved in the borrowing. Statistics on syndicated loans in Hong Kong and Hong Kong loans to customers in China can be obtained from Hong Kong statistics.

Table 5.1 shows the liabilities and claims between the Hong Kong banking system and China.