The Hong Kong forecast: variable skies.

• Author: Graham, Lynford E.
• Position: Chinese economic plans that may affect foreign businesses in Hong Kong

Still uncertain how the Hong Kong handover will play out in China's economic plans? Take a look at a few aspects of the Chinese business environment that may affect your company's decisions.

* For some years, the area surrounding Hong Kong on the mainland has been under rapid development, thanks to its status as a special economic zone. A good example is Shenzhen, a "near new" city a short train ride from Hong Kong. This city has established a high-tech stock exchange poised for growth and efficient trading. For years, Hong Kong dollars have been widely but unofficially circulated in this area. The Chinese are also building a huge bridge for more efficient travel between the island and the mainland, further indicators of its intent to blur the line of demarcation between Hong Kong and the mainland and to encourage investment inland.

* Recently, China has been moving some new investments away from superheated economic regions like Shanghai. It is providing incentives for companies to consider the less developed regions, as well as rejecting companies' applications to locate in cities like Shanghai, which is beginning to suffer from inflation, an overburdened infrastructure and a tightening labor supply for skilled and educated workers. The government is especially likely to reject companies that need a great deal of space but that do not have to be next to a financial or political hub, such as manufacturers.

* The Chinese government is selling little land to business interests, and current leases typically do not extend past 50 years. What happens as they begin to expire? Foreign companies that are, in the eyes of the Chinese government, good corporate citizens, are likely to get favorable renewal terms. Good citizenship usually means sharing information and technology with China. If a company has been reluctant to offer its knowledge or share its profits responsibly during its current lease term, it may find its new lease difficult to negotiate, if it is available at all.

Also, the ministries and the business press have showcased the success of certain foreign companies to build other companies' interest in setting up shop. These "success stories" may have experienced a favorable business environment that may differ from what new entrants experience.

* China has established a separate stock exchange for trading Chinese stocks to foreign investors...