Investment in China by Hong Kong companies

This article is based on interviews with over 50 companies from Hong Kong, China's largest foreign investor. It shows that many investors prefer to go outside of China's Special Economic Zones, and that the Chinese investment "climate' is quite localised. In spite of the Chinese desire to attract advanced technology, the "low-tech' investment from Hong Kong has brought considerable benefits in the form of higher total factor productivity and market access. The lack of backward linkage from the investments actually may be an advantage in the short run, freeing export expansion from domestic supply constraints. -from Authors