Frustrated by Hong Kong's shallow information-technology talent pool, George Yu, founder of e-finet.com, decided to jump in the deep end. He went looking across the border, in China, to fill his staffing needs.

After visiting job fairs in Beijing, Nanjing and Shenzhen last year, Mr. Yu, whose Web site provides financial information, had his eye on a number of experienced software developers and programmers and started to look into options for bringing them to Hong Kong.

But getting through the city's immigration red tape quickly put a damper on things. "I read through the requirements for importing talent from the mainland and found them too stringent. I then decided that it's only a waste of time and effort if I apply," Mr. Yu says.

That is when he concluded that instead of trying to bring tech-savvy workers to him, it was easier to go to them. Earlier this year, e-finet.com started a branch in Shenzhen, hiring 12 programmers and three translators for one-quarter of what it would cost to staff the operation in Hong Kong.

The case of Mr. Yu and e-finet.com illustrates a dilemma for Hong Kong: Despite being part of China and having an otherwise open immigration policy, the city has kept its door shut to professionals from the mainland over fears that it would be swamped by mainland-Chinese immigrants. Hong Kong's tough stance, critics argue, has weakened its competitiveness and contributed to an exodus of business across the border.

"If Hong Kong is trying to get the best and brightest from the world to come here, why is it I can't attract someone from Zhejiang (Province)?" asks Eden Woon, director of the Hong Kong General Chamber of Commerce. "This is stupid why I have to attract someone from Connecticut while somebody from Zhejiang is just as smart and can help me."

A manpower survey by the Hong Kong government forecasts that the next five years will see a shortfall in the city of some 120,000 people with higher-education qualifications. Meanwhile, increasing economic integration has left Hong Kong businesses hungry for recruits with knowledge about China.

In an attempt to alleviate the problem, Hong Kong introduced an Admission of Talent Scheme in late 1999. But Mr. Woon and others say its strict requirement of a doctorate degree or evidence of "extraordinary abilities or achievements" was a major obstacle. In June, Hong Kong introduced a less stringent Admission of Mainland Professional Scheme, allowing companies to bring in mainland Chinese with special skills in information technology or finance, two areas with particular shortfalls. By Aug. 25, the Immigration Department received 153 applications for the new scheme and approved 58 of them, 39 in information technology and 19 in finance.

But it remains to be seen if the relaxed visa policy, now two months old, can stem the high-tech flow across the border. The Software Industry Information Center of the Hong Kong Productivity Council, for example, surveyed 300 out of the 800 local software companies in Hong Kong in August. The group found that one-third of the surveyed companies have opened branches in China in the past few years, with more planning to do so by the end of the year.

For some companies, cost isn't the driving factor. "The supply and quality of local IT talent is obviously a big problem for us," says Richard Wong, chief executive officer of China Electronic Information Technology Ltd., which recently opened a research and development center in Guangzhou. "The quality, efficiency and stability of the workers are the benefits of the mainland." Mr. Wang says he plans to have three to five consultants in Hong Kong, but at least 20 technical staff for software development in Guangzhou.

Many professionals who make it into Hong Kong face further difficulties because their families are prohibited from coming with them. "For people who are 28 or 29 years old, this is very difficult," says Mr. Woon of the Hong Kong General Chamber of Commerce. "I think it's too much of an obstacle. In time they will have to change it."

While businesses have generally pushed for a more liberal policy, labor unions have lobbied the government to impose a quota on mainland-Chinese workers admitted under the new policy. "The scheme could easily be abused by the employers if there is no quota," said Lee Cheuk-Yan, spokesman for the Hong Kong Confederation of Trade Unions. "Local employers would then hire experienced people from the mainland and dodge their responsibility of training local talents."

But change is coming slowly, and Hong Kong's policy remains narrow - restricted only to information-technology and financial professionals. Pro-business groups say Hong Kong's apparent unwillingness to fully tap into what could be one of its biggest assets may leave it in a precarious place.

"Hong Kong is now positioning itself as the New York of China," says Mike Rowse, director-general of the government investment promotion agency Invest HK. But "New York doesn't get to be New York by only hiring people born in Manhattan, New York gets to be New York by drawing on the best and brightest from the whole of North America, and around the world."