Vital Southland economy attracts Chinese investment from Hong Kong, Bay Area.

Vital Southland economy attracts Chinese investment from Hong Kong, Bay Area

For years money has been pouring out of Hong Kong and into Northern California. Now, two streams of wealth are flowing into Los Angeles. One, directly from the Crown Colony itself, the second from Hong Kong investors who established a Bay Area beachhead and are now looking south for fresh investment opportunities.

Los Angeles had always been an afterthought for substantial Hong Kong investment, but that's changing, says a California trade expert based overseas. "San Francisco has traditionally interested Hong Kong investors because they go where the Chinese communities are," says Landy F. Eng, managing director of California's Southeast Asian Trade Office in Hong Kong. Now, he adds, the Hong Kong Chinese are enticed south by the demographics and the economic vitality of Los Angeles, and they are deploying capital into hotels, commercial real estate, restaurants, manufacturing and distribution.

Savvy Hong Kong businesspeople are astute trendwatchers, he points out. "Textiles are a natural," notes Eng, "Hong Kong garment manufacturers are looking at assembly and warehousing facilities in Southern California where many, if not most, already have representative offices."

Hong Kong's wide-ranging trading companies, known as hongs, have sensed this shift and some are catering to it. Cathay Pacific Airways, the crown jewel of Hong Kong's powerful Swire Group, left San Francisco after six years and will begin non-stop service from Los Angeles to Hong Kong July 1.

"Hong Kong investors no longer are solely interested in a small area in San Francisco," says Scott Mowrer, marketing and sales manager/USA for Cathay Pacific, who recently relocated south himself. "Los Angeles is the real hub for Pacific business. Certainly, San Francisco is important, but Los Angeles is more so."

For Cathay Pacific, it was a question of numbers, Mowrer contends: "Los Angeles has a more diversified economy with many companies with Asian interests. More people and business equals more travel."

Another travel-related Hong Kong company is making a major commitment to Los Angeles. The Peninsula Group, which operates luxury hotels in Hong Kong, Beijing, New York and Manila, is now building a fifth -- the Peninsula Beverly Hills. Slated to open a year from now, the 200-room hotel is located on Santa Monica Boulevard near Wilshire Boulevard. David Katemopoulos, the Hong Kong headquartered director of sales and marketing for the Peninsula Group, says, "Beverly Hills is a premier hotel market in the U.S., yet there have been no new hotel properties built here in two decades. We saw that as an opportunity because Los Angeles is the gateway to the Pacific Rim and a natural extension of our other Pacific Rim properties."

Marc Faber, who, until recently, headed Drexel Burnham Lambert's Hong Kong office, has a dimmer view on Hong Kong investors' interest in America and Los Angeles. Nicknamed "Dr. Doom," Faber, who now heads Swiss Asian Investment Consultants in Hong Kong commercial and industrial real estate. "The timing to invest in Hong Kong is wrong now," he says. "There are better fundamentals elsewhere." Clearly, he adds, Hong Kong investors believe Los Angeles is one of those places.

A well-known Hong Kong restaurant chain has opened one of its Harbor Village restaurants in Monterey Park to join two in Hong Kong, one in San Francisco and another in Tokyo. Dominic Lee, assistant manager and director of public relations says, "We were attracted to Southern California because it has such a large Asian community. We are famous in Hong Kong for our restaurants, but we felt the biggest opportunity right now was right here." The $2 million, 450-seat restaurant is on North Atlantic Boulevard in Monterey Park.

For Americans, the flip side of all this investment interest is the fear that increased foreign ownership will threaten jobs and economic security. On the contrary, says Nobel Prize-winning economist Milton Friedman, who thinks American investors should take a lesson or two from Hong Kong. In a recent speech before the Commonwealth Club in San Francisco, Friedman said the "right model" for development is not the United States or Sweden, but Hong Kong.

He says its system of free, private markets has enabled Hong Kong to build great wealth, just as free markets helped the United States in its first 100 years. But now, "we have forgotten that lesson," he says.

Few remember that in the 1800s, Scottish and British money built some U.S. railroads and steel mills. Friedman says the American economy was growing so fast it required more capital than Americans could furnish and savvy foreign investors were happy to turn a profit by providing it.

Now, for different reasons, other economists and trade experts contend the United States again needs capital from abroad. Eng, California's Hong Kong trade expert, says now that U.S. banks and savings and loans are cutting back on lending, Hong Kong investors may very well come in to fill that void. And more funds may flow in. Eng has had discussions with investors looking in Southern California for acquisitions and joint ventures in real estate development, shrimp farming, manufacturing, hotels and restaurants.

Says Friedman, "Foreign investment here is a tribute to the fact that this is the best place to invest. It's not a threat, it's an accolade."