HONGKONG businessmen are being forced to pay bribes of up to $500,000 a year to corrupt mainland officials as graft across the border reaches multi-million dollar levels in China's economic boom. According to a study carried out on behalf of the Independent Commission Against Corruption (ICAC), the ''gifts'' given by large Hongkong companies account for up to five per cent of annual operating costs. Independent legislator Emily Lau Wai-hing said she has been told of the level of corruption in China by people who do business there, and is worried it will spread to the territory. ''These people know firsthand how corrupt and arbitrary it is,'' she said. ''My concern is what happens here. Corruption is like a cancer and it will kill Hongkong if we are not careful.'' With cross-border trade flourishing as the mainland continues to open up to foreign investment, Hongkong businessmen and ICAC officials also fear the graft will get worse. ''They [Hongkong businesses] face the cultural difference that people in China take guanxi [personal connections] as essential and normal,'' the ICAC said in a statement released yesterday, which gave the findings of a survey of 50 local companies with production bases in China. ''It is commonly recognised as a means to get things done. Hongkong businessmen often have to rely on personal friendship and offers of gifts, including cash and, in some cases, deposits in Hongkong bank accounts.'' Eddie So Chuen-yee, the new director of the ICAC's Community Relations Department, which commissioned the survey, last night said the findings were of great concern, especially in the run-up to 1997. ''It is a growing problem and a worrying problem,'' Mr So said. ''The findings showed the businessmen themselves are worried with the possible effects this might have for Hongkong post-1997.'' The survey, which was carried out by an independent academic expert, showed gifts and guanxi could account for three to five per cent of operating costs of businesses in China. ''Such costs are as yet bearable and are not viewed by Hongkong investors as an economic disincentive,'' the report said. But with cross-border figures last year showing 37 per cent of the territory's total external trade was with China, amounting to US$45 billion (HK$351 billion) and set to increase, the amount of bribe money being paid is likely to run into millions of dollars. Mr So, who was not surprised by the findings, said the businessmen simply accepted it as a way of life. ''They have to do it, there is no choice,'' he explained. Of the 50 companies who filled in the questionnaires, 35 admitted paying bribes, although the businessmen did not believe they were introducing corruption to Hongkong, while the remaining 15 said they did not. The ICAC said 25.3 per cent of all foreign investment in China in 1991 came from Hongkong. Corruption is so widespread across the border that firms incorporate bribe money into their annual operating costs. To deal with the corruption the businessmen approach ''co-ordinating offices'' set up by Chinese officials which provide ''one-stop'' services in handling administrative procedures by paying an ''explicit'' management fee. In its statement the ICAC said ''businessmen consider they are victims of the system and would prefer to work in a more honest environment, quoting Hongkong and Singapore as examples''. The report also claims Hongkong investors view the costs as ''bearable'' and on occasion pay cash deposits into Hongkong bank accounts. Legislator Henry Tang Ying-yen, who has a number of manufacturing and electronics businesses in Guangdong and Shanghai, said he was aware of certain ''questionable practices'' but said his firms were not made to pay guanxi. Mr Tang said his firms had to buy a series of ''inspection certificates'' from mainland authorities to comply with local orders on the export of goods. ''They are questionable practices but [I do not know] whether you can call them bribes. ''They actually give you a piece of paper but is that piece of paper worth anything? ''We all understand corruption is prevalent in China but it is not as if any of us can do anything about it,''. he said last night. Mr So said further and more in-depth surveys would be carried out and the issue would become a priority of the department's work over the next few years, including an increase in anti-corruption education.