Investments boost: The Capital Investment Entrant Scheme will help boost capital inflow and economic activities.

The Capital Investment Entrant Scheme will enhance Hong Kong's position in the global competition for captial investment and benefit local financial and economic activities, the Secretary for Security says.

Announcing details of the scheme at a press conference today, Regina Ip said the scheme, which the Executive Council endorsed earlier today, aims to attract more overseas investors and inflow of capital.

The Administration will implement the scheme in the third quarter of this year.

Entrants may get right of abode

It will cover people who have the financial means to make a substantial investment in Hong Kong but do not wish to run a business themselves.

Successful applicants will be allowed to bring in their dependents.

After seven years' of continuous ordinary residence in Hong Kong, capital-investment entrants and their dependents may apply for the right of abode in Hong Kong.

"We will ring-fence the new investment they bring so as to ensure that they bring benefits to local financial and economic activities," she added. "Capital investment entrants will also contribute to local consumption."

$6.5 million investment threshold

The minimum investment required under the Scheme will be set at $6.5 million, and it must be made in a specified list of permissible investment assets.

When asked whether the limit would affect investors' interests in Hong Kong, Mrs Ip pointed out that the $6.5 million threshold is in line with the general level other countries stipulate for admitting investors.

"When compared to admission schemes elsewhere, the arrangements under our Scheme would allow capital-investment entrants greater flexibility in their choice of investment assets to suit their individual needs.

"It provides a proper balance between making Hong Kong attractive in the global competition for capital investors and ensuring that these investors are of an appropriate quality," she added.

Policy not applicable to Mainland residents

The new policy will apply to:

* all foreign nationals

* Macao Special Administrative Region residents

* Chinese nationals who have obtained permanent-resident status in a foreign country

* stateless persons who have obtained permanent-resident status in a foreign country with proven re-entry facilities

* Taiwan residents 

As the Mainland implements foreign-exchange control, Mrs Ip explained, the new policy will not apply to Mainland residents at this stage.

Permitted investments: real estate, financial assets

Under the Scheme, entrants may invest in the following two classes:

* Real estate - whether commercial, industrial or residential, including land and pre-completion properties in Hong Kong; and

* Financial assets - the entrant can invest in one or a combination of the financial assets, such as equities, debt securities, certificates of deposit, subordinated debt, and approved unit trusts or mutual funds.

Requirements imposed to ensure investment

To ensure that an entrant does not reduce his investment commitment to Hong Kong during the time he is permitted to stay in Hong Kong under the Scheme, portfolio maintenance and 'ring-fencing' requirements will be imposed.

"In a nutshell, entrants are not allowed to realise or cash in any capital appreciation of the qualifying portfolio," Mrs Ip said.

"On the other hand, if the value of the portfolio falls below the original level of $6.5 million, no topping up is required."

An entrant is allowed to switch his investments from one permissible asset class to another provided that he adheres to the ring-fencing principle, she added.