Professional Documents
Culture Documents
by
Presented to
In P a r t i a l Fulfilment
May 1991
Professor K C Mun
Advisor
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32108~'
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SUMMARY
Kong to China.
profitable one for the company and it may also offer some
- ii -
CONTENTS
Page
SUMMARY ii
CONTENTS iii
CHAPTER
1 INTRODUCTION 1
2 METHODOLOGY 7
4.1 Background 18
4.2 Shenzhen Special Economic Zone 19
4.3 Huichow · 21
4.4 Shantou Special Economic Zone 23
4.5 Guangzhou - Guangzhou Economic & 24
Technology Developing Zone
4.6 Hainan Special Economic Zone 26
4.7 Zhuhai - The West Economic Developing 28
District
4.8 First-round Conclusion 30
5 FORMS OF INVESTMENT 33
5.1 Background 33
5.2 Compensation Trade 33
5.3 Joint Exploration and Exploitation 35
5.4 Equity Joint Venture 35
5.5 Contractual Joint Venture 37
5.6 Wholly Foreign Owned Enterprise 38
5.7 Comparisons of the Three Forms of 39
Investment
5.8 Final Selection of Investment Form . 41
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CONTENTS
Page
CHAPTER
7 CONCLUSION 60
APPENDEX I
APPENDIX II
APPENDIX III
APPENDIX IV
BIBLIOGRAPHY 62
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..
CHAPTER 1
INTRODUCTION
and toys.
- 1 -
1.2) Economic Situation of China
1978, because the rent, land and labour cost was only
plans in China.[5][7i[8]
- 2 -
1.2) On top of · that, the senior officials of China have
most advantageous.
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..
1.3) environmental engineering equipment and boundary
4 -
..
1.4) b) It is logical to believe that land cost in China
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..
1.4) the pros and cons of the proposed investment in
- 6 -
..
CHAPTER 2
METHODOLOGY
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2.2) preliminary screening process, only the 'hard'
,
- 8 -
2.5) Cash Flow Analyses
Investment Environment
Analysis (I)
- A Comparison of
Hard Environment
\~
Cash Flow Analysis
- NPV, IRR
Calculation
Conclusion
- 9
..
CHAPTER 3
industrial products.
workshop.
Automobile engineering
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..
3.2) Forecasting Methodologies
a) Qualitative analysis
c) Econometric methods
d) Input-output analysis
the cost.
so it is not applicable.
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..
3.2) Econometric methods of forecasting require the user
applicable.
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..
3.3) handling equipment like refuse chutes, compactors,
.- 13 -
3.3) growth of the business turnover for that particular
~ 14 -
3.3) in production facilities. With the large capital
spend in the next 7-10 years for the airport and sea
- 15 -
..
3.3) opening a new factory in China, then it is likely the
countries.
- 16 -
,
..
3.3) construction stage for the new airport and port
- 17 -
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CHAPTER 4
4.1) Background
- 18 -
4.1) There are six places we have selected to make
Kong.
-- 19 -
...
I
.
4.2.2) Installations
telecommunication facilities.
4.2.3) Traffic
-- 20 -
.. .
- 4.2.3} investors, heavy traffic makes the present
need.
4.3} Huichow[2]
4.3.2) Installations
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..
4.3.2) electricity and water. In Daim Au region, there is
at work in Autou.
4.3.3) Traffic
- 22 -
...
4.4) Shantou SEZ[16]
4.4.2) Installations
needs.
- 23 -
4.4.3} Traffic
~ 24 -
..
4.5.1} an area of 58 km 2 and is going to be built as a
4.5.2) Installations
4.5.3} Traffic
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..
4.5.3) urban area by Zhongshan highway and Huangpu
future.
26 -
4.6.2) Installations
consecutively.
4.6.3) Traffic
~ 27 -
..
4.7) Zhuhai - the West Economic Developing District[14]
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4.7.1) a large population clustering around the Delta
4.7.2) Installations
4 •7 •3) Tr a f f i c
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4.7.3} The given up Sarzao Airport has already been
- 30 -
..
4.8) Huichow, though nearer to Hong Kong than Huinan and
considered.
- 31 -
.
"
4.8) extension of the Zhuhai SEZ and which enjoys even
- 32 -
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TABLE ·' 1
~
Location
Condition
General
Environment
Installation Traffic Overall
Assessment
.
I
CHAPTER 5
FORMS OF INVESTMENT
5.1) Background
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5.2) and interests can be made in two ways: by direct or
negotiation.
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5.2) not suitable for the company's present plan because
considered.
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.I
5.4) on 8 July 1979 and revised on 4 April 1990, the new
expiry date.
parties.
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..
5.4) by the two partners, according to the share ratio
profit tax for the first two years and are allowed
profit in China.
need arises.
, ,
I
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.•
5.5) in general the same as is outlined for equity joint
- 38 -
5.6) totally responsible by the foreign investor or the
company.
- 39 -
5.7) efficiency of the operation may tend to be higher.
- 40 -
5.8) Final Selection of Investment Form
- 41 -
5.8) venture and contractual joint venture are the most
- 42 -
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TABLE 2
.•
CHAPTER 6
in China.
- 43 -
6.1.1) a look at the accounts and related notes below.
All figures are shown per metric ton of steel
fabricated product:
In H.K. Dollars
Particulars
H.K. (a) Zhuhai Shenzhen
Depreciation on
Workshop Building
(e) 113 93 101
Depreciation on
Equipment 272 272 272
Royalty Fees 70 70 70
Insurance (h) 14 29 29
Workshop Supervisory
Cost (i) 583 373 408
Accommodation
Building Deprecia-
tion (n) - 75 94
Labour Accommodation
,
Allowance (0) - 36 50
Outgoing Allowance
for H.K. Staff - 450 450
r
.. - 44 ~
6.1.1) (cont'd)
In H.K. Dollars
Particulars
H.K. (a) Zhuhai Shenzhen
Less: Other Special
Expenses (p) - 167 167
,
Insurance for
. Shipping Out Goods · - 17 17
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6.1.2) (b) the parent company · at a lower price, as we
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.
I
6.1.2) (d) but the size of the land in Shenzhen and
years.
(h) Insurance
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6.1.2) (h) transportation insurance for the materials,
China.
in China only.
-- 48 -
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6.1.2) ' (1) managerial staff planned to travel frequently
time.
provided.
49
..
6.1.2) (q) Implicit Cost
implicit cost.
6.1.3) Conclusion
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..
6.1.4) Results from Questionnaires (For Form of
Questionnaires, See Appendix Ill)
Zhuhai Shenzhen
Description (%) (%)
*VG *G *S *F *p *VG *G *S *F *p
1) Supply of skilled 0 10 70 20 0 0 10 60 40 0
labour
2) Labour productivity 0 10 70 20 0 0 10 60 30 0
3) Abilities of labour
in handling more
complicated task 0 0 20 ,7 0 0 0 0 10 90 0
4) Condition of
electricity supply 0 70 30 0 0 0 10 60 20 10
Zhuhai Shenzhen
Description (%) (%)
*VG *G *S *F *p *VG *G *S *F *p
5) Availability of
transportation and
communication
facilities 10 70 20 0 0 10 60 30 0 0
6) Condition of other
utilities supply 0 10 90 0 0 0 10 80 10 0
9) Efficiency of the
municipal government 0 0 90 10 0 o· 0 90 10 0
..
- 52 -
6.2) Cash Flow Analysis
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..
6.2.1) Table 3
1994
Ca~ital Investment 1992 1993 U:Q To 2001 Total
(HK$) (HK$) (HK$) (HK$)
Ca~ital
3} Machinery Equipment:
i) 1 unit of 45MT 1,000,000 0 0 1,000,000
mobile crane
ii) 1 unit of 200MT 1,000,000 0 0 1,000,000
press
iii) 2 units of band 1,500,000 0 0 1,500,000
saw
thereafter is expected.
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6.2.1) ii) The working life for all the buildings,
assets is assumed.
n
Pv = I I (1 + K)1
i=l
= $10,937,500 + $5,381,059
= $16,318, 55,9
-----------
-----------
- 55 -:
6.2.3) Notes to Cash Flow Analysis Table:
three years.
~ 56 -
6.2.3} a} iv} product is assumed to be adjusted upward
year.
.. - 57 -
6.2.3) d) ii) Foreign investments in Zhuhai enjoy tax
exemption.
10
NPV = I NCFt - Ct ------ (6.1)
t=l (l+i)t
,
~ 58 -
6.3) NPV = $950,000 + 3,277,000 + 5,638,000 + 8,644,000
(1+12%) (1.12) 2 (1.12)3 (1.12)4
= $13,166,368
-----------
10
NPV = I
t=l
NCFt
(l+ki}t
- Ct = °
-- 59 -
TABLE 4
-. Estimated Profits and Cash Flow (in Thousand Hong Kong Dollars)
Particula-rs
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 .
Net Sales Revenue (a) 28,000 35,200 43,560 53,240 58,564 64,420 70,862 77,949 85,744 94,318
Less: Cost Incur~ed (b) 19,380 22,093 25,186 28,712 32,732 . 37 , 314 42,538 48,493 55,282 63,574
Gross Profit 8 ',620 13,1,07 18,374 24,528 25,832 27,106 28,324 29,456 30,4-62 30,744
Less: Selling & Administra- 8,400 10,560 13,068 15,972 17,569 19,326 21,259 23,385 25,723 28,295
tive Expenses (c)
. .
Net Income before Tax 220 2,547 5,306 8,556 8,263 7,780 - 7,065 6,071 4,739 2,449
Income Tax (d) - - 398 642 620 1,167 1,060 911 711 367
i
Net Income 220 2,547 4,908 7,914 7,643 6,613 6,005 5,160 4,028 2,082
Add: Depreciations 730 730 730 730 730 730 730 730 730 730
:
Net Cash Flow 950 3,277 5,638 8,644 8,373 7,343 6,735 5,890 4,758 2,812
CHAPTER 7
CONCLUSION
From the cash flow analysis section, we have found out that
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co-operating parties and fair ways of distribution of
given to them to make sure that they can have the necessary
skill and knowledge about the work that they are expected
to perform.
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APPENDIX I
..
Appendix I
I N DON E S I A·
Import Policy
Marketing
...
SIN GAP 0 R E
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Solid Waste Disposal
..
APPENDIX II
..
Appendix 11
ZHEJIANG
JIANGXI
HUNAN'
FUJIAN
GUANGDONG
GUANGXI
Guangzhou
HA I NAN
APPENDIX III
Appendix III
I;mT~~~ijt±~~ 0-6952783
MBA Programmes 3-7225808
Faculty of Business Administration (Town centre)
~1:.W~{j}f~.m~
. Student Research Projects 1 st March 1991
Dear Sir/Madam,
We are a couple of. students from the Three-year MEA programme of the
Chinese University of Hong Kong. As part of the requirements for the
programme, we have to carry out a business research project, which is the
"Feasibili ty study of Estab lishing a Heavy Steel Fabrication Factory in the
Southern part a'f China."
Thank you very much in advance for your kind support. Should you have
any queries of suggestions, please kindly contact us (Angus Cheung at
7671118 or Royal Tarn at 7396683) at any time convenient to you.
Yours faithfully
..
SURVEY OF THE INVESTMENT
QUESTIONAIRE
, .,
SECTION A
Please give a tick to the bracket that best describe your
company
..
SECTION B
Please tick those items that you think or feel that are
appropriate for the questions below
Please circle the one that best describe your opinion about
your company's operation in Shenzhen/Zhuhai
very
good good satisfactory fair poor
10) How about the supply
of skilled labour 5 4 3 2 1
..
very very
low low medium high high
23) What is the labour turnover
rate 5 4 3 2 1
very
good good satisfactory fair poor
25) How do you rate your
degree of satisfaction with
regard to your investment 5 4 3 2 1
27) Please tick the items below that make you feel dissatisfied
with your investment in Shenzhen/Zhuhai
1. J08 TITLE:
----------~~~----------~~~--~-----------------------------
2. AGE: ( ) UNDER 25· ( ) 25 - 35 ( ) 36 - 45
( ) 46 - 55 ( ) over 55
3. EDUCATION: ( ) SECONDARY ( ) POST-SECONDARY
( ) UNIVERSITY ( ) POST-GRADUATE
4. NUMBER OF YEARS WITH THE COMPANY:
5. YEARS OF WORKING EXPERIENCE RELATED TO CHINA TRADE: ----------------
The End
APPENDIX IV
..
Appendix IV
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/
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BIBLIOGRAPHY
- 62 -
..
BIBLIOGRAPHY
20) 閔建蜀,(投資環境的評估),中國沿海開放城市投資環境及評價
~ 方法研討
會 ,一九八六年t月五日至九曰
21) 閔建蜀,(談我國發展沿開地區),大公報一九八八年四月二十曰
第四至五版
CUHK L; bra r; es
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000321087
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