No other cities in the world are so large and so close as Hong Kong and Shenzhen, yet have such different economies, Executive Council Member Leung Chun-ying said during the PRD Conference's session on "Social Implications of PRD Integration."

The cost factor is the most noticeable and powerful difference. A recent survey by the Planning Department found that in 2000, the lowest 10 per cent of incomes in Hong Kong were higher than the top 10 per cent in Shenzhen and Guangzhou. "This wide gap will not close quickly," he said.

The low cost of living in the Pearl River Delta is tempting an increasing number of Hong Kong citizens to take up residence and spend more of their leisure time on the Mainland.

Last year, 53 million people, mostly Hong Kong residents, crossed the border into Guangdong. Some 42 per cent of those trips were for leisure, while 30 per cent of trips to Hong Kong were for work. The survey also found that about 145,000 people living in Hong Kong travelled to the Mainland at least once a week. In the reverse direction, 6,800 people living on the Mainland travelled to Hong Kong for leisure at least once a week. The number of Hong Kong citizens who commute across the border daily averages 7,200, while 2,200 students cross the border daily to attend school in Hong Kong.

Not counting leisure trips, 71,000 Hong Kong and Mainland residents cross the border for family, work or schooling daily or at least once a week, Mr Leung said. "This number is equivalent to 1 per cent of Hong Kong's population. So looking at these figures, I would save the word integration for another day."

That day may not be too far away. In September, the number of immigration counters at Lo Wu will rise to 170, which will expand its capacity by 20 per cent. In three years' time, the western-crossing from O Hom Shek, of Yuen Long to Shekou in Shenzhen, will be ready for cross border traffic. The capacity of the new link will be 2.5 times greater than the total number of cross-border points combined. In five years, the KCR Lok Ma Chau spur line will also be ready.

"If family ties, economic forces and cost of living were the driving forces in the two fold increase in the last five years in cross border movements, and if the major constraint is the checkpoints, what will be the movement in five years' time from now?" Mr Leung asked.

If more Hong Kong people do choose to live on the Mainland, the question of extending heavily subsidised services -- such as education, healthcare and housing -- to Hong Kong residents over the border and to new residents to Hong Kong are matters of immense financial and economic implications, he said.

The idea of setting up government housing and retirement homes on the Mainland for Hong Kong's senior citizens has been chewed over for years. So too has the idea of providing schools for Hong Kong children living in the Mainland so that they do not have to cross the border into Hong Kong daily to attend school.

Cheng Yiu-tong, chairman, Hong Kong-China Relations Strategic Development Research Fund, said under the "one country, two systems," Hong Kong should not restrict itself by trying to control the flow of human capital in and out of Hong Kong and open up more.

"In terms of the labour market, if we allow talent to go out, then we should allow talent to come in," he said. "We are faced with a human resources problem in Hong Kong, and as we all know, we have to develop high tech industries, added value industries, to compete in the global market."

This shift from manufacturing, which used to make up 7 per cent of Hong Kong's GDP, to a service economy, has resulted in an ever-shrinking job market for Hong Kong workers with form-three education or below, who number about 1.7 million people.

"We don't have too many jobs for these workers. Meanwhile, we are exploring high-tech industries, but we don't have enough talent to fill these positions," he said. "So what we have is a mismatch in human resources in Hong Kong."

While Hong Kong talent can freely leave the Hong Kong SAR -- a survey by the Planning Department estimates 190,000 Hongkongers are working on the Mainland -- restrictions make it difficult for Mainland talent to work in Hong Kong. Of the approximately 60,000 Mainlanders who come to Hong Kong legally every year on one-way permits, most of these immigrants have received little education.

Hong Kong has few jobs for these people, so Mr Cheng suggests that even in the case of family reunions, that these family reunions could take place on the Mainland, and that they be given the right of abode in Hong Kong. This would allow them to continue to stay on the Mainland, while still be reunited with their family.

Given the sensitive nature of such a policy, Mr Leung said if Hong Kong ever wanted to embark on this course, any change to policies would only be possible if they were only built on solid social consensus. Even though discussing such issues have been put off time and again, "it is high time we, as a community, started applying our minds to these issues," he said.

An influx of workers into the Pearl River Delta from all over China, as well as Hong Kong, has resulted in a rapid growth of the property market.

"In Guangdong, investment in real estate development of commodity buildings grew to 65.6 billion yuan in 2000 from just 3.2 billion yuan in 1990," Dr Raymond Kwok, vice chairman & managing director, Sun Hung Kai Properties, told the audience.

Over the same period, per capita floor space for urban residents rose to 20.1 square metres from 12.1 square metres. In Shenzhen, the floor space of commodity buildings sold (including pre-sale of projects under construction) amounted to 6.1 million square metres in 2000, of which 5.6 million square metres was residential space.

High population concentration and a vibrant market have helped fuel much of this growth, and Hong Kong's property developers and retailers can play a role in this growth but they must move more quickly.

"Early footholds are the key, as is timely decision making once we arrive," Mr Kwok said. "From a geographical perspective, integration should define our approach in the delta. Hong Kong must look for every possible opportunity to enter into the delta's emerging cross-city alliances."

For the moment, Hong Kong and the Pearl River Delta must be considered as essentially different markets and priced accordingly, because "obviously, the Pearl River Delta cannot today support Hong Kong prices," Mr Kwok said.

A dominant player in the property market in the Pearl River Delta has yet to emerge, which leaves ample room for growth and opportunities for Hong Kong firms to share their experiences and expertise.

"The experience that we at Sun Hung Kai Properties have already gained in Beijing, Shanghai and Guangzhou has already shown the importance of these principles," he said.

Dr Kwok warns that even though prospects for developers in the PRD are so enticing, companies should guard against over-supply in the market. The solution to this problem is not increased government interference with market forces, but a stabilising government presence together with a predictable supply of land suited to market needs.