SEVERE damage may be done to Hong Kong's economic well-being if the question of who will have the right of abode cannot be solved before the territory reverts to Chinese control, as the Director of the Hong Kong and Macau Affairs Office has warned. The consequences of leaving the definition of citizenship and a decision on right of abode in the hands of the future provisional legislature should not be underestimated.

Lu Ping's statement is more than a demonstration of bad faith on the part of the Chinese Government. It signals to the territory's trading partners worldwide that they will have to question the status of every Hong Kong passport-holder. If the territory's rules covering the right of abode are unclear, countries which now accept businessmen and other Hong Kong travellers visa-free will begin to demand advance visa applications. Anyone whose right to return to Hong Kong cannot be guaranteed may not be granted entry. It is not expatriates unsure of their permanent residency who will be affected, but locals with no other travel document.

Mr Lu's reassurance that expatriates will still be able to acquire permanent resident status in Hong Kong after 1997 if they have lived in the territory for more than seven years is welcome. So, too, is his promise that non-Chinese residents whose families have been in the territory for generations will be able to apply for Chinese citizenship if they would otherwise be stateless. These statements demonstrate Mr Lu's desire to reassure those communities most concerned that their right of permanent residency is in doubt. But neither statement is evidence that China has recognised the problems surrounding its present course.