But things turned out differently. In the immediate years following the

handover, China carried on booming while Hong Kong stalled under the

impact of the Asian crisis. Now, contrary to the pessimists’ worst

fears, Chinese policy is being crafted to shore up Hong Kong’s economy.

New measures will ensure that Hong Kong remains a leading FDI

destination both for inward investors wishing to target the Chinese

market and for the growing band of Chinese companies taking their first

steps overseas.

The ground-breaking Closer Economic Partnership Arrangement which goes

into effect from January 1, 2004 will allow Hong Kong companies to

export to China tariff-free on 90% of goods. The terms of access are,

in some cases, better than and realisable way ahead of China’s WTO

commitments. Since multinational companies can realise these benefits

too, provided they have been doing business in Hong Kong for three to

five years, this is a huge boost to FDI in the territory.

But that’s not all. China is allowing its nationals to travel more

freely to Hong Kong and to take more money with them and has made

overseas investment by Chinese companies much easier. As most Chinese

first time overseas investors make Hong Kong their first port of call,

this is another boon to the Hong Kong economy.

With Hong Kong accounting for a sizeable chunk of China’s GDP, the idea

that the mainland would deliberately ruin the place was always somewhat

fanciful. Now the dust has settled, it’s clear that China is Hong

Kong’s best friend. Investors should be looking again at Hong Kong both

for itself and as the continued natural jumping off place for China, a

role it has faithfully performed since the Communist Revolution in

1949.