INTRODUCTION
This paper discusses the background to a major new immigration problem facing Hong Kong, the choices facing the people of Hong Kong and their government, and how we intend to tackle the problem.

BACKGROUND
2.Hong Kong occupies an area of just 1,097 square kilometres. With 6.8 million residents, it has one of the highest population densities in the world.

3.After the Second World War, Hong Kong's population was 1.8 million. It grew to 2.2 million in 1950 and continued to rise in the following years. The annual growth rate reached a high of 5 per cent in 1979, due largely to illegal immigration. The trend was reversed after a new policy was introduced in 1980 whereby all illegal immigrants were repatriated. The average annual population growth rate in the past decade was 1.7 per cent.

4.As a result, the thrust of Hong Kong's policies was able to switch from quantity to quality. With growing prosperity, the Government was able to provide more and better facilities and services across the board with regard to housing, education, health and social welfare. In 1998/99 almost HK$150 billion (US$19.2 billion), or 54 per cent, of public expenditure was spent on these services. In the decade from 1988 to 1998, GDP grew by an average of 3.7 per cent, while per capita GDP in 1998 was HK$192,785.

THE ISSUE
5. Hong Kong became a Special Administrative Region (HKSAR) of The People's Republic of China (PRC) on 1 July 1997. The Basic Law is a Chinese national law and is the constitutional document of Hong Kong. It enshrines the basic policies of the PRC regarding Hong Kong and the various systems to be practised in the HKSAR. One of the basic policies of the PRC has always been to help ensure Hong Kong's prosperity and stability by controlling the outflow of people to Hong Kong.

6. The Basic Law stipulates that persons of Chinese nationality born outside Hong Kong to parents with right of abode in the HKSAR would themselves be entitled to right of abode (i.e. permanent residency) in the HKSAR.

7. As a result of a ruling by the Court of Final Appeal (CFA) on 29 January 1999, the following additional categories of people became eligible for right of abode in Hong Kong:

(a) Children born out of wedlock whose mother does not have the rightof abode in Hong Kong

(b) Children whose parents did not have the right of abode in Hong Kong at the time of birth (but whose parents have subsequently acquired the right of abode)

8. The CFA also ruled that the Hong Kong SAR could not require that 'Certificates of Entitlement' establishing the right of abode in Hong Kong of Mainland residents be affixed to 'One Way Exit Permits' issued to Mainlanders. This means that the HKSARG would not be able to control the rate of intake through the One Way Permit scheme. Under this system, 150 Mainland residents are admitted for settlement each day