The recent global economic crisis in many regions of the world has provided an opportunity for China by boosting its role in Asia and in the world economy at large. As the US, the EU and rest of the world gradually recovers from the crisis, China continues its trajectory of spectacular economic growth.
The United States, Canada, Australia, New Zealand as well as the United Kingdom have traditionally been attractive immigration destinations because they are stable democracies which offer a high quality of life.
However, with the recent global financial recession and the deteriorating economic conditions in many of the western economies, one economy which has been very resilient has been the People’s Republic of China, which in turn has benefited Hong Kong as a Special Administrative Region (SAR) of China that has become increasingly integrated with the mainland economy.
With a GDP growth rate of 8.7 per cent in 2009 and its rising prominence in global supply chains and foreign investment, China is drawing the gaze of multinational corporations, entrepreneurs and investors eastward. Since migration tends to reflect socioeconomic and political trends, the rise of China coupled with evolving dynamics in the world economy points to new immigration options in the Asia region. This in turn has considerable implications for immigration law practitioners, and it will be crucial for immigration practices to continue to recognise these changing trends and adapt accordingly.
Hong Kong, a former British colony and currently a Special Administrative Region (SAR) of China, is a global financial centre with world-class transport infrastructure, port management and logistics services. With its proximity to China and its low tax regime, Hong Kong is a strategic gateway to the many business opportunities in Mainland China. In addition to its well-established infrastructure, Hong Kong is a free economy with a simple and low tax regime. It has no capital gains tax, no tax on dividends and interest income from bank deposits and no sales tax, and completely abolished estate tax effective 11 February 2006. Assessable profits of corporations are assessed at 16.5 per cent while the standard salaries tax, at 15 per cent, is among the lowest in the world.
These factors have made Hong Kong a top location for commerce, investment and trade. Moreover, Hong Kong’s common law jurisdiction offers a transparent and accessible judicial system that extends to its flexible immigration policies. These characteristics have consistently attracted multinationals to set up Asia Pacific regional headquarters in Hong Kong and foreign expatriates around the world have found Hong Kong a much desired posting.
Today, Hong Kong is a very attractive alternative jurisdiction for residency, not only for senior corporate executives of multinationals but also for investors from the People’s Republic of China, as well as for business entrepreneurs from Taiwan, Malaysia, Singapore, India, North America, Western and Eastern Europe as well as nationals of developing countries.
Increasingly, foreign citizens have taken an interest in immigrating or relocating to Hong Kong in order to gain greater proximity to the burgeoning Chinese economy. Those taking part in this recent migration trend are typically highly skilled, well educated and high-income professionals, many of whom are in the banking and financial industry, along with individual entrepreneurs and investors. Through employment visas and the Capital Investment Entrant Scheme, many have gained residency rights and hope to apply for the right of abode in Hong Kong after seven years of ordinary residence in Hong Kong.
Indeed, some US citizens who have acquired the right of abode have even decided to renounce their US nationality in favour of becoming naturalised Chinese nationals entitled to HKSAR passports which entitle the bearers to visa-free access to some 140 countries/territories and to entry into China through the application of a Chinese Hui Xiang Zheng (home return permit). In addition to its low tax regime, Hong Kong is very attractive as it only taxes its residents on profits from a Hong Kong source, unlike the US, which taxes its citizens on worldwide income regardless of where they reside.
The crucial platform Hong Kong provides to individuals and their families who are interested in relocating to China and Asia more generally is just one recent trend in a long history of migration patterns involving Hong Kong and China. Hong Kong has been an important point of entry and exit to China since the establishment of the People’s Republic of China (PRC); and, many will argue, even before then. From the establishment of the PRC government in 1949 until the mid-1970s, large-scale migration to Hong Kong as well as Taiwan occurred despite the fact that emigration from China to other countries was relatively limited. Masses of Chinese nationals fled as refugees and later immigrated to Hong Kong in order to avoid political and economic uncertainties at home and to explore more promising opportunities.
After settling in Hong Kong, many have then used it as a launching pad to other foreign destinations. During the 1970s and 1980s, more liberal exit immigration policies in China and in destination countries such as the United States, Canada, Australia and New Zealand led another wave of Chinese nationals to settle abroad.
In 1978, China’s Open Door Policy, primarily aimed to promote foreign trade and investment into China, relaxed immigration policies and made it easier for Chinese students to study abroad. Immigration of Chinese nationals to countries such as the United States was also encouraged by legislation such as the Immigration and Nationality Act of 1965, which abolished the national origin quotas. The combination of policies in China and destination countries such as the United States thus helped to facilitate highly educated and skilled professionals and their families to settle overseas.
Beginning in 1966, with the onset of the Cultural Revolution and later on, with the lead-up to Hong Kong’s handover back to China in 1997, waves of Hong Kong citizens immigrated overseas due to a different set of circumstances. This group of immigrants, predominantly middle to high-income families across all professions, considered immigration options because of the political uncertainty and in anticipation of potential instability during Hong Kong’s transition from being a colony of the UK to its designated China SAR status. During this time, many Hong Kong citizens acquired foreign residency and citizenship status in countries ranging from the United States, United Kingdom, Australia, New Zealand and Canada.
A reversal in immigration patterns took place upon China’s accession to the World Trade Organization in 2001. This new shift in immigration patterns was a response to China’s flourishing economy at this time and the country’s progressively more outward-oriented approach to trade and investment. Recognising a brain drain since the 1970s, when many talented and skilled Chinese professionals settled overseas after studying abroad, the PRC government began to entice overseas Chinese, so-called hai guai (“sea turtles”), back to China to fill high-level managerial positions in state-owned enterprises and other firms.
Other opportunities also sprang up in private industry for the sea turtles, as multinationals began to realise how invaluable overseas-educated Chinese with a native command of the Chinese language and culture – along with substantial in-country contacts – could be in advancing corporate needs if reassigned back to China.
The return of the sea turtles marked the beginning stages of the most recent immigration trend, where overseas Chinese and foreign citizens alike are drawn to work, stay and live in China, and to take part in growing economic opportunities in the country. It also signalled, for the first time since the 1940s, China’s growing appetite to compete for global talent in the areas of finance, banking, marketing and management. The recent immigration of foreign citizens to Hong Kong, post-1997, is similarly another reflection of this recent trend.
This trend will likely continue in the near future: China will continue to be a major economy on the world stage, and Hong Kong will continue to reap the benefits of its strategic position in liaising China with the world. This ongoing trend will be further bolstered by ongoing trade and investment arrangements in the Asia region. One such platform is the China-Hong Kong Closer Economic Partnership Arrangement (CEPA), a free-trade agreement signed in 2003 which opens the Chinese market up to Hong Kong producers and service suppliers by eliminating tariffs on all goods of Hong Kong origin.
Hong Kong also stands to benefit from the China - Association of Southeast Asian Nations Free Trade Agreement (China-ASEAN FTA), signed in 2002, which came into effect in January 2010. The China-ASEAN FTA aims to liberalise trade between China and the 10 ASEAN members by eliminating tariffs on 90 per cent of products traded between the parties and will continue to place Hong Kong as a prime location for capital flows, trade in goods and trade in services, and thereby immigration.
Past trends and future prospects in Hong Kong and mainland China illustrate the evolving profile of immigrants to and from this region. For immigration lawyers, this translates to a shift in the needs and demands of our clientele. The earlier wave of immigration cases from China focused on students interested in studying abroad, skilled professionals seeking temporary or longer-term employment options and permanent resident status overseas, and middle to upper-income earners and their families looking to settle in a foreign country. Today, China has become an attractive destination for highly qualified professionals to return or relocate to China; and for many returnees or immigrants, the passage to China is via Hong Kong.
The ever-changing patterns of migration in this region necessitate immigration legal services to be client-centred and flexible, with a priority on customised immigration solutions that adapt to the clients’ needs. It is important to recognise that immigration patterns are not stagnant, and the current status quo could change again. This further emphasises how important it is for immigration legal specialists to remain adaptable and to continue to expand their expertise on existing and new immigration legislation that emerges in their country of practice, while maintaining a global network of international legal practitioners around the world.
When I became an immigration lawyer more than three decades ago, immigration law was an esoteric field in the domain of small boutique firms, with large firms frowning on this practice area as essentially the filling in of forms, which work, if taken on at all, was mostly delegated to paralegals in the firm.
As the world became increasingly more globalised, the big international law firms began to realise that their corporate clients needed help to manage global mobility, and immigration law became a booming practice area. Many of these multinational law firms today have either established an in-house immigration law practice group, or developed important alliances with boutique immigration firms to help corporate clients deploy their international executives and workforce rapidly around the world, while complying with local immigration laws and rules in the destination locations.
In addition to immigration advice and services, many firms may offer a more fully-integrated solution to client needs in international assignment services, including tax, expatriate compensation and benefits issues as well as international mobility/assignment management.
However, while many firms have focused on the immigration law needs of their corporate company clients, there is also a niche market for the provision of individualised and customised immigration and tax services to the senior executives employed by their corporate clients which has been overlooked. This is because in the age of budget cutbacks and law firm beauty contests to win the work of corporate clients, many corporate immigration and accounting firms have offered assembly-line reduced fee services on a flat-fee basis for both employment visa and tax compliance work, and are loathed to spend extra non-billable time with senior executives who need more customised advice, even though many senior corporate executives are more than happy to pay top-dollar for customised expert advice concerning their personal situations.
In the same vein, unlike the more traditional ethnic Chinese businessmen who were happy to pull up stakes completely to settle in their adopted country, the needs of the mainland China entrepreneur of today, who is often unable to make his actual residence in the destination country because of business demands in China, is regularly neglected by professionals who can only offer a single jurisdiction one-size-fits-all solution.
What such an individual actually requires is more sophisticated multi-jurisdictional immigration advice where he may still select a particular destination country as a first-choice, long-term safe haven for himself, as well as his family, to hedge against political uncertainty in his home country, while at the same time putting into place additional options in alternative jurisdictions.
In our increasingly globalised world, the new breed of businessman is often a homegrown PRC entrepreneur or a highly educated Chinese citizen who completed his undergraduate training in China and obtained his graduate degree in a major western country, but who has chosen to return to China after acquiring substantial working experience in the West. It could also be a naturalised or natural-born American citizen who has embarked on a very successful career in Asia, who may no longer desire to remain an American citizen.
To the Chinese entrepreneur without overseas residency, obtaining permanent residency in the US, Canada, Australia, New Zealand or the United Kingdom may still be an attractive insurance against possible future adverse political developments in his home country. However, although his spouse and children are able to obtain citizenship in the adopted country, the entrepreneur is often himself unlikely to be able to spend sufficient time there to meet the residency requirements to qualify for citizenship in the destination country.
Indeed, in many jurisdictions, the entrepreneur may even have a difficult time maintaining or retaining his permanent residency because of prolonged absences necessitated by business needs in his home country after successfully immigrating.
Given the rather onerous rules for the retention/acquisition of permanent residency and the period of physical presence required to qualify for citizenship (jokingly referred to by Hong Kong Chinese leaving Hong Kong in the lead-up to 1997 as serving an immigration prison sentence), the modern PRC Chinese entrepreneur must have a back-up alternative.
The answer for many of these clients lies in a two-prong approach: acquiring a passport of convenience in a jurisdiction which does not require a period of physical presence, which country’s passport would immediately allow for visa-free travel privileges to the many countries which deny these privileges to PRC nationals; and the concurrent acquisition of residency in Hong Kong which, after seven years of ordinary residence, will eventually lead to a Hong Kong Special Administrative Region passport offering visa-free access or visa-on-arrival privileges to some 140 countries/territories.
One such Economic Citizenship programme is that offered by the St Kitts and Nevis Citizenship Act, 1984 which is attractive not only to PRC businessmen but also to Americans interested in acquiring a new nationality for tax considerations or travel safety reasons. Of course, in advising on an alternative citizenship option, the international immigration law practitioner must perform due diligence to ensure the legislative basis and legality of a recommended passport programme are sound if the acquisition of such a passport of convenience is part of the overall strategic solution for a client’s situation.
International immigration lawyers would therefore be well advised to develop the expertise and professional contacts in various jurisdictions to adequately serve the more sophisticated, multi-jurisdictional immigration needs of clients in this globalised world.
The author would like to thank Stacey Chow, former country manager for China and Mongolia with the US Trade Development Agency, and now a trade analyst in Washington DC with the World Bank, for her contributions to this article.