HONG KONG - Hong Kong has called a sudden halt to its capital investment immigration programme, creating shock waves on both sides of the border.
In his Policy Address on Wednesday, Chief Executive Leung Chun-ying announced the suspension of the Capital Investment Entrant programme, beginning on Thursday.
He said Hong Kong no longer has the economic environment that it had in 2003 when the programme was introduced.
The city's Immigration Department said that in 2003, when the Hong Kong economy was in recession, the plan was brought in to attract new capital to stimulate economic growth.
This is no longer the government's priority in view of the current economic situation in the city.
Leung said in a question-and-answer session after the Policy Address that Hong Kong is now looking for talent, rather than money.
Under the programme, people could gain residency in the city by investing a minimum of HK$10 million (S$1.7 million) in the local financial market. It had raised about HK$205 billion for Hong Kong by September, including money invested in real estate.
Analysts believe the government is attempting to review the programme and that the suspension won't be permanent.
Patrick Shum Hing-hung, investment director at Tengard Fund Management, said such investments will not help the city's economy and it is time for the government to review the programme.
If entrepreneurs come to invest, not through buying stocks or funds, but by setting up companies in the city, such investments will enhance employment and shore up the economy, Shum said.
The government's decision may also be a measure aimed at supporting the major anti-graft efforts on the Chinese mainland, Shum added.
It will deprive corrupt officials on the mainland of a channel to transfer their illegally gained assets through Hong Kong, he said.
A spokeswoman for financial adviser Haitong International said the suspension should be temporary and the company is not worried about a permanent cancellation.
In an interview with local media, Eddie Kwan, the founder and chairman of EK Immigration Consulting, said the news is "shocking" for people who want to migrate to Hong Kong.
Convoy Financial Services, which objects to the suspension, said it will have an impact on the industry. It hopes the government will provide a timetable for ending the suspension and consult with the industry.
In October 2010, the government banned investors from trying to obtain residency by buying apartments in Hong Kong.
According to the Immigration Department, 28,168 investment immigration applications were received between 2003 and March 2013.
The number of applications increased by 43 per cent to 40,392 by the end of September last year, with the number of cases approved rising from 17,746 to 24,481.
Workers at immigration consultancies rushed to the Immigration Department headquarters to submit applications before the midnight deadline. A spokeswoman for the department said the suspension will not affect the 12,000 pending applications.