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August 6th, 2008:

Businesses To Get Help Upgrading

Chloe Lai and Dennis Eng – SCMP – Updated on Aug 06, 2008

Hong Kong and Guangdong leaders have pledged to help Hong Kong-owned businesses upgrade their Guangdong operations after recognising the contribution they have made to the province’s economy.

Speaking after the latest round of talks on cross-border co-operation yesterday, Chief Executive Donald Tsang Yam-kuen and Guangdong governor Huang Huahua vowed the two governments would not leave Hong Kong businesses to struggle unaided amid unfavourable economic conditions.

Hong Kong accounted for half the US$14 billion foreign investment Guangdong received last year and has been a key contributor to the province’s runaway economic growth.

Guangdong backed down on earlier plans to shut down highly polluting factories, which will now get help to move up the value chain.

Mr Huang said: “The processing trade has made a considerable contribution; however, they must upgrade themselves.”

He said the provincial government would help the businesses upgrade their technology so they could become high-end manufacturing or service industries.

He said he hoped such businesses would evolve and eventually have their own brands.

Mr Tsang said the Hong Kong government would also help businesses relocate to other provinces, such as Jiangxi and Hunan .

He said: “The Hong Kong government will help our businesses to upgrade without suspending production, otherwise it will have a negative impact on the people’s livelihoods and their clients, as well as the overall economies.”

Charles Li Kui-wai, associate professor of economics and finance at City University, said many companies had been unhappy about being forced to move and had complained to the Hong Kong government.

“There wasn’t much the government could do, as this just involved Hong Kong investments,” the professor said.

“But these factories also employ a lot of workers. Getting rid of them would have caused the Guangdong economy to suffer. So there is a sense that Guangdong backed down a bit.”

Chinese University economics professor Sung Yun-wing said upgrading the processing trade would be positive for both sides, as Hong Kong’s service industries and Guangdong’s economy would be hurt if the factories disappeared.