The central government is actively studying the proposal to allow mainlanders to come to Hong Kong as investment migrants, Chief Executive Tung Chee-hwa said in Xiamen Sunday.

The main stumbling block, he pointed out, is the control on foreign exchange.

The chief executive said that he talked with Vice-Premier Wu Yi in Xiamen for half an hour before representatives from Hong Kong's business sector joined the meeting.

Tung said that the SAR government has been urging Beijing to allow mainlanders to come to settle in Hong Kong - on the basis of making investments or purchasing properties in the city. The central government is actively studying the proposal. But he admitted that the arrangement would not be possible until controls on foreign exchange are relaxed.

Vice-President Zeng Qinghong also said in Beijing Sunday that there is a major technical problem as allowing the outflow of capital involves a bigger policy change. Moreover, rumours about the qualified domestic institutional investors have rocked the mainland stock markets and aroused great concern.

Zeng's remarks were quoted by Tsang Yok-shing, chairman of Democratic Alliance for Betterment of Hong Kong, who led a delegation of the political party which wrapped up its three-day visit to Beijing Sunday.

Zeng reassured Hong Kong people that the central government would adopt a positive attitude in studying the proposition that is already on Beijing's agenda, Tsang said.

At the meeting between Tung and Wu, they also talked about the details of the implementation at the end of this month of the Mainland-Hong Kong Closer Economic Partnership Agreement in the realms of origins of products and the extension of Hong Kong's professional services into the mainland market. Both sides agreed that they should solve easier problems first.

Furthermore, they exchanged views on the co-operation between the Pearl River Delta and the Yangtze River Delta which they considered as conducive to the development of the national economy.

Tung will attend the opening ceremony of the 7th China International Fair for Investment and Trade in Xiamen and deliver a keynote speech at the International Investment Forum today.

He will return to Hong Kong later Monday.

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