Chinese Business, Politics Take Root in Hong Kong a Bit Early

Article excerpt

Hong Kong has become an El Dorado for many Chinese and many Chinese companies. Although only seven months remain until China resumes sovereignty over Hong Kong on July 1, in many respects China - its businesses, its way of operating, its politics - have so permeated this territory that little is left to be done but lower the Union Jack.

Hong Kong, even without the flutter of the Chinese flag, has become part of China.

"Everyone understands the nature of the game," said Denis Fred Simon, who runs the China Strategy Group for Andersen Consulting. "The West is being moved out, and China is taking over." The power wielded by mainland companies is more than simply their commercial muscle, and the interests of Beijing are paramount. Most telling was China's decision to strip the old British "hong," or trading house, Swire Pacific, of its majority stake in Cathay Pacific, the territory's major airline, a deal that was thinly disguised as a straight commercial purchase. "I don't think anyone should be under any illusions that that was not a sweetheart deal for the Chinese," said John M. Mulcahy, an investment banker. At the same time, many of Hong Kong's local tycoons have signed on as official advisers to Beijing and have taken seats on various committees appointed by Beijing that are molding Hong Kong's post-colonial government. Not only have business deals been smoothed on the mainland, but major projects that now require both China's and the colonial government's go-ahead have been redrawn in favor of local tycoons. Favors are also becoming part of the mix. China's new Foreign Ministry building is being built under management donated by Hong Kong's Li Ka-shing. Its conglomerates have frequently required Beijing's approval. For decades, a handful of Chinese companies have done business in the colony - the Bank of China, China Resources, China Travel, China Merchants. But in the last five years, Chinese companies have flooded Hong Kong, buying property, wooing foreign deal makers, looking for capital - and finding a safe haven for great piles of hot money from China. …