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Crisis in China Has Hong Kong Investors Looking to Southland

June 26, 1989|BILL SING | Times Staff Writer

For years, many Hong Kong-owned companies have been reluctant to invest large sums in Southern California or elsewhere in the United States, seeing investment returns back home in the colony as superior and fearing being labeled as unpatriotic. But the recent violence and unrest in China is making those few Hong Kong companies that have invested large sums here feel somewhat vindicated.

Take International Landmark Group. The company, which years ago began developing shopping and housing projects in Los Angeles' Chinatown and Monterey Park, is working on new residential and shopping complexes in Los Angeles and Oakland. Other purchases under study or negotiation: a U.S. real estate holding company, a West Coast financial institution and a five-star New York hotel.

"We have been diversifying in the U.S. and in other countries in the last 10 years, way before the latest Chinese incidents," says Joseph M. Chan, president and chief executive of International Landmark. "But the recent incidents in China confirmed we have made a wise choice, and we will continue to diversify as planned."

Chan adds that a friend in Hong Kong who runs a large garment manufacturing firm is looking to acquire or set up some manufacturing operations in Southern California.

These and other examples add up to expectations of a growing presense of Hong Kong companies and individual investors in Southern California in the wake of the recent Beijing massacres and subsequent Chinese government crackdown on dissidents.

Some Hong Kong companies and investors began buying Southern California real estate or setting up businesses here years ago, long before the 1984 agreement by Great Britain to turn over the colony to China, or before the unrest in China. But many others have been reluctant to enter the market here, in part because the Hong Kong economy was booming and because investing here would have been seen as a sign of a lack of confidence in the colony's future.

Attitude Changed

But the Chinese unrest--coming along with Hong Kong's rising labor costs, a "brain drain" of talented people out of the colony and attractive prices in the United States--has caused a change in attitude.

Concerns about China already have resulted in an initial spurt of capital flight from Hong Kong into Southern California in the form of savings deposits and other cash investments, bankers report.

Investments in real estate and new business ventures by nature will take longer to develop, partly because it may take awhile for Hong Kong firms and investors to get money freed up. With Hong Kong real estate prices plummeting 20% to 25% since the Beijing massacres, many prospective real estate sellers are finding few buyers.

But in the coming months and years, local experts expect more Hong Kong firms in such industries as garment manufacturing and trade to set up manufacturing, sales and distribution branches here.

Real estate investments by Hong Kong investors--until now relatively small and generally not involving glamorous, high-profile "trophy" properties--may become larger and more noticeable. And they will be increasingly outside communities with large Chinese populations, such as Chinatown or Monterey Park, which Hong Kong investors initially favored.

"We are beginning to see loan requests from people in Hong Kong to purchase property in California," says Dunson Cheng, president of Los Angeles-based Cathay Bank.

"A lot of my friends are coming to L.A." to look for acquisitions, says Y. Y. Chan, a Chinese-American businessman in Los Angeles who serves on a California state advisory panel that encourages greater Asian investment here. One such Hong Kong friend, Chan notes, visited Southern California this month looking to spend $5 million on a shopping center, possibly in Los Angeles, Orange or San Diego counties.

Didn't Trust Pact

To be sure, not all Hong Kong investors think the upheaval in China has really changed things all that much and that the colony's economy will recover from the initial shock of the Beijing massacres.

"People in China never trusted the agreement between China and Britain anyway," contended Joseph Poon, vice president of Taico Properties, a Los Angeles subsidiary of Tai Cheung Properties, a Hong Kong hotel and real estate firm. Taico has developed several housing, office and industrial projects throughout Southern California, and the latest events in China won't affect its plans for others a great deal, Poon says.

"We'll just keep doing the same thing we've been doing," Poon says. "I don't detect a knee-jerk reaction from the home office."

But for others, latent fears that China may renege on its agreement to preserve the free-wheeling capitalist system in Hong Kong after it takes over the colony in 1997 are far more real.

Hong Kong was the largest foreign investor in China, but many from the colony now see the Chinese market as less attractive from a pure economic standpoint.

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