On Tuesday the most avid snapper-up of stakes, Citic Pacific, the Hong Kong-listed arm of the China International Trust and Investment Corporation, was at it again. It swooped and gathered up a 20 per cent share in the colony's biggest electricity utility, China Light & Power (CLP), for pounds 1.3bn.
The Kadoorie family, which controls CLP, appears to have been only too willing to take in Citic Pacific as a partner. Having had most of their assets expropriated in China after moving from Shanghai following the Communist revolution, the Kadoories know something about the need for political insurance.
Indeed it may be said that all Hong Kong companies, like CLP, which rely on state regulation, would not dare contemplate the future without the benefit of a Chinese partner.
This may explain why Citic Pacific holds strategic stakes in the Cable & Wireless-controlled Hongkong Telecom, the Swire Pacific-controlled Cathay Pacific airline, the monopoly air cargo terminal operator, two of the three cross-harbour tunnel companies, a clutch of property development projects and a 20 per cent interest in the Manhattan Credit Card Company.
Citic Pacific, the star blue chip share performer of 1996, is only the most extreme example of a Chinese state corporation that is building up a formidable presence in Hong Kong.
The company was founded by Peking's court-approved millionaire Rong Yiren, who serves as one of China's vice-presidents. When Citic was established in 1979, with the blessing of China's paramount leader Deng Xiaoping, he wanted Mr Rong to bring his capitalist expertise to the management of Chinese companies and encourage foreign investors to join forces with the new conglomerate to develop business in China.
As things turned out Citic proved to be more interested in investing overseas, particularly in Hong Kong. Returns from these investments dwarfed the money to be made in China itself.
There are no accurate figures to show the level of Chinese investments in Hong Kong but estimates range from pounds 16bn to pounds 28bn. Chinese investment dwarfs that from all other sources. In all there are estimated to be at least 4,000 China-owned companies in the colony, ranging from large business concerns to companies set up by provincial governments to quite small trading houses. By the beginning of the decade Chinese-backed companies were responsible for transporting around a quarter of the colony's cargo and were involved in more than 12 per cent of construction work.
The fact that businesses believe they need to buy political insurance clearly signals the reality of how business will be conducted in the new era. It is already apparent what will happen to those whose who fail to secure good political and business connections, or, worse still, fall out with China.
The UK-controlled Jardine group, depicted by China as colonial ogres, is shunned by the rest of the business community and has an uphill battle to win new business.
A European banker who closely follows Chinese companies says, "basically they can have anything they want in Hong Kong, as long as they have a bit of money and a lot of political influence in [Peking]".
However, Chinese partnerships are already causing problems. The most spectacular example was provided by the downfall of the Shougang Group in 1995. Headed by Zhou Beifang, whose father Zhou Guanwu was a close associate of Deng Xiaoping, Shougang swept into Hong Kong at the end of 1992. In less than three years the group, based on a Chinese steel maker, had a controlling interest in five Hong Kong-listed companies and was firmly in bed with the ubiquitous tycoon Li Ka-shing who personally took a one-third share in Shougang International, while his flagship company Cheung Kong Holdings was holding 12.9 per cent.
The combination of Mr Li and the well-connected Mr Zhou excited investors and sent the company's shares soaring. Such was the typically exaggerated excited atmosphere that few people questioned what the Shougang companies were doing nor, subjected Mr Zhou's activities to much critical analysis. In February 1995 he was arrested in Peking on charges of "economic crimes".
The bubble quickly burst and the company is a shadow of its former self.
This should have sent red alert signals throughout the market but it did not.
The Kadoories clearly believe they have secured the future of their power generation interests, the Swire family, which controls the Swire Pacific group, must also believe that it will be able to continue running its airline, but it is far from clear whether Chinese-controlled companies will be infinitely satisfied to remain as minority stake-holders.Reuse content