Hong Kong's citizens, per capita, drink the most cognac, drive the most Mercedes Benz cars, export the most textiles, toys and watches, gamble the most and read the most newspapers in the world. Hong Kong has long benefited from being a duty-free port, that is, the colony has no important tariffs. Hong Kong is set to return to Chinese rule on July 1, 1997, at which time China plans to march 15,000 troops into the former colony. The Sino-British agreement stipulates that Hong Kong is to become a special administrative region, with its own legal and judicial system alongside economic autonomy until 2047. Despite the agreement, numerous entrepreneurs in Hong Kong have doubts about the survival of Hong Kong as an international finance center with free movement of capital after 1997. Many of the business persons leaving Hong Kong immigrated to Canada, and many of Hong Kong's returnees are coming back from Canada.

Life in Hong Kong

Life is good in Hong Kong. Per capita, Hong Kongers drink the most cognac; drive the most Mercedes Benz cars (the highest Mercedes Benz market share in the world, over 12.5 percent of the colony's private cars); export the most textiles, toys, and watches; gamble the most; and read the most newspapers in the world. The colony has 69 registered newspapers, including two English-language dailies (among them the South China Morning Post which developed the world's first Braille daily). Hong Kong also has more cellular phones per capita than anywhere else in the world, providing communications for entrepreneurs, bankers, brokers, bullion centers, etc. Ninety-eight percent of Hong Kong households own televisions.

Hong Kong has one of the world's most comprehensive public transportation systems; it is privately-owned and unsubsidized. The underground Mass Transit Railway carries over two million people daily, while about 31/2 million passengers use at least one of Hong Kong's three bus services. Hong Kong also has 163 electric trams. The new airport, scheduled to open in 1997, is part of the largest civil engineering project in the world. Hong Kong's Kwai Chung container port is the biggest in the world. A railway links Hong Kong with China. Demand for transportation is so high that sometimes trains are fully booked; the author once had to purchase a ticket from an entrepreneur on the black market.

The Regulatory and Tax Climate in British Hong Kong

Hong Kong has long benefitted from being a duty-free port, that is, the colony has no important tariffs. The only duties are those on alcoholic beverages, cosmetics, hydrocarbon oils, methyl alcohol, motor vehicles, and tobacco.

Unlike many governments which fund new ventures and offer loans to entrepreneurs, Hong Kong offers no special incentives. Instead, a laissez-faire policy of free trade and low taxation, coupled with minimal regulation and an excellent infrastructure has made Hong Kong an attractive manufacturing and financial center, the eleventh largest trading entity in the world. It is relatively easy to create a new venture in Hong Kong; even foreigners have no obstacles to set up an enterprise there. A company may be established within 72 hours of application. Establishing a branch office of a foreign company with limited liability is also simple. The income tax is a flat 15 percent, and there is neither sales tax nor V.A.T. in Hong Kong. Perhaps most symbolic of the lack of government involvement in the economy is the fact that there is no central state bank in Hong Kong; currency is issued simultaneously by the Hong Kong and Shanghai Banking Corporation and by the Standard Chartered ! Bank.

China's Impending Takeover and Potential for Adverse Change

According to the Joint-Declaration of the 1984 Sino-British Agreement, Hong Kong will revert to Chinese rule on July 1, 1997, at which time the People's Republic of China plans to march 15,000 troops into the former colony. The agreement stipulates that Hong Kong is to become a "Special Administrative Region" with its own legal and judicial system alongside economic autonomy until the year 2047. Despite the Joint-Declaration, numerous entrepreneurs in Hong Kong have doubts about the survival of Hong Kong as an international finance center with free movement of capital after 1997.

Worried about the impact that China's communist policies may have on Hong Kong's capitalist economy, many entrepreneurs have emigrated. This trend has already been well-documented (Cannon 1989; Chen 1988; DeMont and Fennell 1989; and Nash 1993). However, a trend that might bear more exploration is the flow of many Hong Kong business persons coming back to Hong Kong after having emigrated, despite the impending takeover by the Chinese. Many of the business persons leaving Hong Kong immigrated to Canada, and many of Hong Kong's returnees are coming back from Canada. The focus of this note is to examine this "boomerang" phenomenon.

To Canada and Back

Before proceeding it needs to be stated that trying to quantify immigration patterns between Hong Kong and Canada is not a straightforward process. As Nash explains:

[It is] very difficult to get hard data on the numbers and types of people leaving Hong Kong. Data are not systematically released by the Hong Kong government; foreign embassies in the colony are reluctant to comment on the number or characteristics of those applying for immigration because they are concerned not to embarrass the Chinese government (1993, p. 310).

Nevertheless, unpublished data reveal that immigration from Hong Kong to Canada has been significant (see Table 1).

Since 1987, Hong Kong has been the principal source of immigrants to Canada, and since 1988, Canada has been the destination for about half of all emigration from Hong Kong; since 1992, the majority of Canada's immigrants have come from Hong Kong. Of 61,600 persons emigrating from Hong Kong in 1994, 43,710 moved to Canada. Furthermore, Hong Kongers account for the majority of business immigrants entering Canada.

Regarding returnees, the Immigration Department of the Hong Kong Government shows a total of 300,000 persons moving to Hong Kong between 1985 and 1994; among these are believed to be substantial numbers of returnees. Although Kwong (1990) calculated that only one in twelve emigrants returned to Hong Kong during the 1980s, a March 4, 1993, press release by the Hong Kong Government suggests that, of all the Hong Kongers who emigrated between 1982 and 1992, one out of eight have returned to Hong Kong.

What is striking is that emigrants to Canada appear to have the highest rate of return. Mosher (1991) found that more than 35,000 Hong Kongers returned home after obtaining Canadian passports; Nash (1993) indicates that each year, 5,000 Canadians of Hong Kong origin (excluding students) move back to Hong Kong. Nash also cited a source reporting that "one-third of emigrants (to Canada) return to Hong Kong (1993, p. 314)." To better understand these immigration patterns, let us first look at the immigration and business climate of Canada.

Canadian Immigration Policy

Since the 19th century and up to the 1960s, Hong Kong was a major port from which male, unskilled laborers departed to seek employment overseas, and Canada was a favorite destination. As elaborated upon by Skeldon:

What makes the emigration from Hong Kong at that time interesting in terms of migration theory is that it cannot be related to the labor-surplus nature of the economy . . . the emigration occurred not from the labor-surplus urban economy - where the hawker economy became the safety valve - but from the villages of the New Territories (1994, pp. 25-26).

Construction of the Canadian railroads employed numerous Chinese, and although these originally saw themselves as sojourners, many stayed and became self-employed, particularly in the restaurant business. Canada was a place to make money, some of which was sent to the family in Asia. Often, wives remained in Hong Kong indefinitely.

To stem the flow of Hong Kong immigrants into Canada and the flow of Canadian dollars over her borders,

Canadian regulations were enacted to discourage Hong Kongers from immigrating to Canada. For example, persons of the Chinese race were made to pay increasingly higher head taxes. This culminated in the Chinese Exclusion Act of 1923 that limited Chinese immigration to a quota of 105 persons per year. (This act was repealed in 1943).

In 1967, Canadian immigration legislation was overhauled, establishing a point system whereby a person could become an immigrant based on economic contribution, rather than on race and religion. Some countries (Bangladesh, the Marshall Islands, South Africa, Tahiti, Tonga, and Trinidad and Tobago) have offered citizenship in exchange for investment, and others (Australia, Canada, New Zealand, and the United States) have opted for migration programs targeted at attracting business migrants.

Since 1978, Canada's business migration program has lured numerous Hong Kong residents to Canada. The current program offers preferential admittance to three types of potential immigrants: (1) entrepreneurs, whose activities can create jobs for Canadians; (2) the self-employed, who create their own jobs; and (3) investors, each with a net personal worth of at least $500,000 (Cdn.) and investing a minimum stipulated amount for a three-year period into business development and job creation. This program does attract immigrants to Canada; however, the Canadian regulatory and tax climate adversely affects the entrepreneurial environment for these immigrants once they arrive.

Regulatory and Tax Climate in Canada

Small business in Canada suffers from relatively heavy economic regulation (Levi and Dexter 1983), paperwork requirements (Peterson and Peterson 1981), non-tariff barriers (Dana 1990), and complex tax requirements. Not only are Canadian entrepreneurs taxed at high tax rates, but they are also responsible for the collection of a two-tiered sales tax. Lack of coordination between federal and provincial levels of government during the first years of the "Goods and Services Tax" in Canada resulted in the small business sector spending more than $1 billion (Cnd.) administering this tax. Further, in the Province of Quebec, the religion of a taxpayer determines the amount of taxes payable on real estate holdings - a Protestant or Jewish entrepreneur is required to pay a higher school tax on real estate property assessments than is a Catholic. These factors have perhaps created an environment hostile enough to entrepreneurial activity to discourage Hong Kong business persons from s! taying in Canada, at least partly explaining the boomerang phenomenon. What other factors might be involved?

Other Considerations

Migration is a complex social phenomenon involving historical and political forces; enterprise is an activity responsive to economic opportunity and no longer limited by geographical boundaries. While Canada offers a low-risk environment in which to spend money, Hong Kong offers a better environment in which to earn money: better jobs, better pay, quicker promotions, fewer and lower taxes, and a better environment for entrepreneurship.

It makes sense to maximize economic gain in Hong Kong, while minimizing political risk in Canada. This is the strategy of the Taikongren, the Chinese word used to describe the entrepreneur who gains Canadian citizenship and then returns to maximize entrepreneurial profit in Hong Kong. (Literally, the word Taikongren is a Cantonese play on the words "empty wife." It alludes to a house without a husband in Canada, because the (male) entrepreneur is maximizing economic gain at the house without a wife in Hong Kong.)

Specifically, a variety of factors make Hong Kong more attractive to entrepreneurial activity than Canada. Some of these factors include:

Population Density. Although limited in geographic size to an area of approximately 1,100 square kilometers (land is constantly being reclaimed from the sea), population density in Hong Kong's urban areas exceeds 40,000 people per square kilometers. As a result, many consumers are clustered tightly, facilitating logistics of distribution in a vast market.

The China Link. Adding to the vastness of the market is the fact that Hong Kong citizens make purchases for relatives residing in China, and in recent years, an increasing number of Chinese have been coming to shop in Hong Kong. Southern China is the fastest growing economic region in the world, and Hong Kong is benefitting directly from this.

Liberalization in China. The adoption of an open-door economic policy by China and the development of special economic zones within China have helped Hong Kong entrepreneurs acquire low-cost merchandise in China. Small manufacturers moving their facilities to China have benefitted greatly from low production costs. (In Guandong province alone, there are 16,000 Hong Kong-owned factories employing two million people.) Also, Hong Kong entrepreneurs have had considerable success exporting Chinese products overseas.

A Growing Market in China. The birth of an emerging middle class in China has resulted in a greatly expanded market, easily catered to by Hong Kong entrepreneurs acting as middlemen between China and industrialized countries. On an average day, 14,000 trucks cross between Hong Kong and China.

The Taiwanese Embargo. Hong Kong entrepreneurs also benefit greatly from the embargo between Taiwan and China. Whereas it is forbidden for a Taiwanese enterprise to export to China directly, Taiwanese entrepreneurs sell to Hong Kong entrepreneurs who trans-ship to China. The value of merchandise transshipped from Taiwan to China via Hong Kong exceeds $3 billion U.S. annually.

GDP Growth. World Bank figures reveal that during the 1980s the per capita GDP in Hong Kong grew at over 7 percent per year. In contrast, per capital GDP growth in Canada hovered at 3 percent per year.

All these considerations might well provide entrepreneurs enough incentive to move their operations back to Hong Kong despite the daunting prospect of yet another overseas uprooting. For many, such a prospect would be too enormous to contemplate. However, one must recognize that Hong Kongers have a long history of spatial mobility that continues today. If Canada offers political security, then why not go there and take advantage? If Canada's prospects become disappointing (a report by Employment and Immigration Canada [1991] revealed that the majority of Hong Kongers in Canada experienced a drop in economic gains upon moving to Canada), then why not go back to Hong Kong where business is better and one is at home? The desire to live in one's home country should not be underestimated here. Over a century ago, Smith wrote:

to the foreigner. . . the simple, obvious, indispensable recipe for the relief of many ills to which the Chinese are subject is emigration . . . But this is an expedient which the Chinese themselves will never adopt . . . No Chinese will leave his home unless he is in some way driven to do so . . . No Chinese leaves his home not intending to return. His hope is always to come back rich, to die and be buried where his ancestors are buried (1894, pp. 165-6).

A century later, Hong Kong Chinese are still attached to Hong Kong; spatial mobility allows them to go to Canada for citizenship, but many then return to Hong Kong. Concern about the Chinese takeover of Hong Kong in 1997 has subdued. Instead, Hong Kong's entrepreneurial spirit and prosperity is spreading to China, often with the help of Hong Kong's prodigal entrepreneurs.