Hong kong direct investment in china’s mainland: A spatial study with special reference to the locational behaviour of investors

The study shows that the regional differentiation of Hong Kong direct investment (HKDI) in China was enlarged in the 1980s and has been reducing since 1991. The concentration of HKDI in the southern China and the coast has been replaced by the trend of moving northwards and inlandwards after 1989. But in terms of manufacturing sectors this trend has not clearly appeared until now. Those changing patterns are clearly related to the behaviour of Hong Kong industrial investors. The survey results suggest that “enjoying lower production cost” is the most important motive for their investment in China. In consequence, “close to Hong Kong”, “cheaper labour” and “favourable policy” are major factors for determining the investment locations. This behaviour, together with the lack of comparison study in location selection among most investors, explains that Guangdong absorbed most Hong Kong investment in the 1980s. As the production costs have been increasing in Guangdong, some companies have started to invest in non-Guangdong locations since the end of the 1980s. From the mental map of Hong Kong investors, however, only some of the non-Guangdong locations are practically attractive. Supported by National Natural Science Foundation of China and the University Graduates Association (Hong Kong). The author gratefully acknowledges the help from Professors Kam-hon Lee and Yue-man Yeung and Dr. David Chu at the Chinese University of Hong Kong, and Mr. Chai-ming Mak at Electricity Advisory Services Limited (HK) during the early stage of the study.