Economic Integration with the Mainland – Pregnant Mainland Mothers and the Right of Abode

Last year there were about 95,000 child births in Hong Kong, of which 36,000 (or 37.5%) were born to Mainland women whose husbands are not permanent residents of Hong Kong. These women had traveled to Hong Kong on two-way permits (or short-term visas) to give birth and their babies will have a legal right of abode in Hong Kong.

 

Babies born to such women should be distinguished from other Mainland women whose husbands are permanent residents of Hong Kong. The latter are classified as “Type I” babies, while those whose fathers are not permanent residents are “Type II” babies. This choice of terminology is used in a study entitled Babies Born in Hong Kong to Mainland Women (published in the Hong Kong Monthly Digest of Statistics, September 2011) that found considerable differences in parents’ socio-economic characteristics between these two types of babies.

 

Mothers with Different Backgrounds

 

The survey was conducted in five rounds from 2007 to 2011 (see Table 1). The first and fifth rounds showed that Mainland mothers of Type II babies are significantly more economically active, more likely to work as administrators, managers and professionals, more educated, and older than the mothers of Type I babies. Moreover, the educational and occupational characteristics of fathers of Type II babies are not only higher than right-of-abode fathers of Type I babies, but are likely to be higher than the average for all fathers who are Hong Kong residents of babies born in recent years.

 

 

Table 1:     Parents’ Socio-Economic Characteristics of Babies Born in Hong Kong to Mainland Women

 

	Type I Babies: Father being a Hong Kong Permanent Resident		Type II Babies: Father being not a Hong Kong Permanent Resident
	2007	2011	2007	2011
Mainland mother is economically active	20%	38%	48%	72%
Mainland mother is administrator, manager or professional	5%	14%	23%	53%
Father is administrator, manager or professional	20%	41%	46%	73%
Mainland mother has post-secondary education	15%	26%	28%	59%
Father has post-secondary education	14%	32%	31%	60%
Mother is less than 30 years of age	66%	65%	47%	40%
Parents’ intention to eventually let child live in Hong Kong	97%	92%	62%	64%
Decisive factor for letting child to live in Hong Kong is better education	NA	71%	NA	82%
Decisive factor for not letting child to live in Hong Kong is to want child to grow up under guidance of their parents	NA	68%	NA	67%

Note: First round of survey was conducted in 2007 and fifth round in 2011.

 

The issue of pregnant Mainland mothers giving birth in Hong Kong has sparked a great deal of public controversy. The two main concerns are (1) overcrowding in maternity wards and overworking of doctors in the public sector, and (2) the reinterpretation of our laws to deny residency rights to children born in Hong Kong to parents who do not have right of abode, in order to stem the growing numbers of such births.

 

Both issues relate to the cost of giving birth in Hong Kong. There are two types of costs. The first cost is for maternity related health care, the second is the full cost of services that are provided to any person who has the right of abode here. These include subsidized education, health care, housing, and all those types of entitlements that Hong Kong society provides for its permanent residents. If pregnant Mainland mothers are charged the full cost for maternity care and these other subsidized entitlements that their child can claim, then there is really no reason for the public to complain anymore. The Mainland mothers would have paid the full cost of giving birth in Hong Kong. To discriminate against them under these circumstances would be to compromise our commitment to free trade.

 

We do not penalize tourists who come to shop in Hong Kong and stay in our hotels, so why should we do so when Mainland mothers come to purchase hospital services and pay for the entitlements of their newborn child who automatically gains the right of abode? Hong Kong is a free port, has always supported free trade, and practiced non-discrimination in our relations with the rest of the world. We have no grounds for discriminating against Mainland mothers.

 

On the first issue about overcrowding hospitals and overworked doctors, there is public concern that competition for health care services has compromised the ability to adequately meet local demand. Central to this concern is the question of subsidy and whether the maternity fee charges have been set at an appropriate level for those who do not receive a subsidy, such as those without right of abode. A related issue is why the supply of maternity services has not increased to meet rising demand.

 

Health care services in Hong Kong have always been heavily subsidized from the public purse. These subsidies take many forms.

 

Free Rent in Public Organizations

 

First, at both public and private hospitals the value of land has often been provided by society for free or at a nominal cost. Some commentators have implied that the subsidy problem is therefore not limited to the public sector because even in the private sector hospitals have received land grants at preferential rates in the past. While technically correct, the argument is largely a specious one. The opportunity cost of land values has been annulled by law through public consensus.

 

Granting land for free or at nominal prices is a common practice in almost all societies – rich and poor, urban and rural – even where land values have varied enormously. This practice is often applied to many social and community services, including health care, education, sports, religion and a large variety of other services. As a result, land values are almost never considered to be part of the cost of these services that should be charged or budgeted for. For simplicity reasons and as a general principle, it is therefore common to treat government land grants for hospitals as cost free.

 

Second, there is an element of public subsidy in the training of medical and health care professionals because they have been educated in publicly funded Hong Kong institutions where tuition fees are set below social cost. Such subsidies are present even when doctors and nurses treat local patients and in the private sector. Moreover, not every local person requires the same amount of medical and health care over their lifetime so there is an implicit element of cross subsidy. To the extent that society is concerned about such subsidies then the best remedy is to charge full tuition fees to be financed by government student loans or private charity donations. Tampering with medical and health care salaries and fee charges is highly inefficient and intrusive, and it is the wrong economic approach to correcting for such subsidies.

 

Third, medical service fees at public hospitals are often set at subsidized rates that do not recover the full capital and recurrent costs of running a hospital. It may be argued that it is justified to subsidize local patients given that Hong Kong’s public health care system is funded from the public purse using taxpayer dollars derived from locally generated income. But this would not normally apply to individuals who enter Hong Kong seeking health care. The decision to charge such visitors the full cost is economically sound and could be made at the institutional level without requiring public legislation, unless institutions fail to do so. It then becomes an issue of public concern.

 

Healthcare Personnel Shortage Foreseeable

 

However, public sector doctors and nurses may still have a reason to complain that their workload is heavier as a consequence of treating pregnant Mainland mothers but this is not reflected in their salaries. Some have argued that this situation is exacerbating the exodus from public hospitals to the private sector. There is talk that some public sector doctors would welcome the opportunity to deliver the babies of Mainland mothers if their salaries could be suitably raised. To permit this to happen would of course undermine the present remuneration and management practices of the Hospital Authority.

 

But the deeper question surely is this: why has the supply of health care services, and the provision of doctors and nurses, not grown fast enough to meet rising demand? In contrast, for example, the supply of retail sales staff has responded rapidly to the growth of Mainland tourists, not only in core shopping areas, but also in remote areas in the New Territories. Talk of medical and health care tourism has existed for over a decade. Moreover, the Government’s policy is to promote medical services for export as one of the six economic pillars adopted in the wake of China’s 11th Five-Year Plan.

 

The answer is that the supply of doctors and nurses is heavily regulated and subject to the influence of powerful lobbies that limit the numbers who are trained and who can register and practice in Hong Kong. Protectionism is the name of the game. After 1997, we no longer even allowed those who were trained in the United Kingdom to be immediately registrable to practice in Hong Kong, even if they were Hong Kong permanent residents. The problem of overcrowding in maternity wards and the overworking of doctors in the public sector is therefore a self-inflicted one. It has been exacerbated by the falling supply of doctors over the past 15 years and it was entirely foreseeable.

 

Hong Kong today is ageing rapidly and needs many more doctors and nurses than it has. We need to train more local and overseas students to meet this need, especially in nursing, and we need to allow more foreign trained ones to practice in Hong Kong.

 

Populism is Enemy of the Rule of Law

 

Coming to the second issue of whether our laws should deny residency rights to children born in Hong Kong if both parents do not have right of abode, there are two concerns.

 

First, it is not desirable to deliberately precipitate a reinterpretation of the laws granting right of abode to these children because tampering with specific laws to achieve immediate social objectives, and pampering to opportunistic social interests, erodes the rule of law. Political populism is the enemy of the rule of law and this concern applies regardless of whether reinterpretation is engineered through the Court of Final Appeal or performed by the Standing Committee of the National People’s Congress.

 

The second concerns relates to the relevant considerations for granting right of abode in Hong Kong. This is an issue that is central to Hong Kong’s population policy. Hong Kong today faces severe demographic pressure arising from low population growth and rapid ageing of the population. Common sense would suggest that Hong Kong should have approximately 100,000 child births each year just to sustain the present population size if immigration is held constant at its present levels.

 

But what is the quality of these immigrants? As the example of the mothers of Type I babies show, it is not very high. The quality of skills and talents among Hong Kong’s population has been watered down because our immigration policy is overwhelmingly skewed towards family reunion purposes. The one-way permit quota system probably worsens the problem by forcing many children to grow up in families that live apart and do not have adequate access to education and health care support from Hong Kong. In the absence of a deliberate policy to further invest in human capital and to attract skilled and talented immigrants, our continued prosperity will be under threat.

 

Any discussion of population policy must first address Hong Kong’s relationship with the Mainland regarding border control and the system of one-way permits. Even before 1997, China considered Hong Kong as part of its sovereign territory and refused to treat Mainland residents entering Hong Kong as crossing a national border. The Hong Kong government therefore does not possess legal rights over the administration of border control matters.

 

The one-way permits system allows local Chinese authorities to decide who will get the permits to enter Hong Kong based on a set of agreed principles. These govern the total number of such permits to be issued each year and the criteria used to decide priority for the permits. Given the large volume of cross-border marriages, it was natural to give high priority to family reunion. Indeed the quotas are still inadequate in this regard and have kept many families apart for long periods of time.

 

Ridiculous One-way Permit Quotas

 

Those who designed the system were obviously concerned about the immediate consequences of allowing large numbers of people to enter the territory and the stress this would place on Hong Kong’s social services. Their answer was a quota system to protect the subsidized welfare state.

 

The system has now been in place for 30 years and it has severely compromised Hong Kong’s long term economic prospects and worsened economic division within and across generations. The system is also subject to unavoidable abuse by local Chinese authorities who administer the one-way permits and by Hong Kong residents who organize marriages of convenience.

 

Yet a quota system that regulates who can become a permanent resident in Hong Kong will become increasingly an oxymoron as social and economic integration continues. A much better approach is to unbundle the different rights that are acquired by right of abode as much as possible and afford those rights different treatments.

 

First, the rules determining who has the right of abode in Hong Kong should become part of Hong Kong’s population policy. Such a policy should be clearly articulated including those sections governing responsibility for approving admission of residents from the Mainland.  Hong Kong should also participate in its direct administration.

 

Second, spouses of permanent residents of Hong Kong should be permitted to reside in Hong Kong immediately upon verification that the marriage is bona fide. This right must be given to permanent residents of Hong Kong for otherwise it would compromise their right to freely choose a spouse.

 

Some abuse is inevitable but this could probably be reduced through a more rigorous process of verification. The verification process should be administered by both Hong Kong and local Mainland authorities.

 

Third, the question of who would be entitled to subsidized social benefits such as education, health care and housing needs to be decided. One possible consideration is to pass legislation that denies these benefits to children born in Hong Kong to parents are both not permanent residents, perhaps after a certain date. These children would still be entitled to the right of abode and a Hong Kong Special Administrative Region passport, but they would not “inherit” subsidized social benefits through their parents or by marriage. This would unbundle the right of abode by birth from the right to receive these benefits. The right of abode therefore is treated as a pure public good that Hong Kong can provide at little additional cost, as compared to subsidized social benefits.

 

Preserving the Basic Law

 

The surveys from 2007 to 2011 showed that just over 60 per cent of Type II parents intended to eventually let their children live in Hong Kong, whereas over 90% of Type I parents had such intentions. This suggests that a substantial proportion of Type II parents are only interested in acquiring the right of abode status and not the subsidized social benefits. Therefore, unbundling the two for Type II babies would filter out Mainland parents who wish to free ride on these benefits in Hong Kong.

 

There will still be a supply of Type II babies from Mainland parents who wish to have their children born in Hong Kong. We have no reason not to welcome them. They represent our export of medical services, which we will have to expand to continue to meet such demand. As an integral part of China it would be quite anomalous for Hong Kong to refuse pregnant Mainland mothers entry to Hong Kong to give birth. We have no right to abuse our privilege as a Special Administrative Region, but we do have a right to prevent our subsidized social services from being abused. An example of this can be seen in the way local authorities on the Mainland have so far handled the problem of rural migrant workers in urban areas.

 

Hong Kong and Mainland Economic Integration Series (Part 2)