Saw this on the HK immigration website:
Supplementary Information
Under paragraph 2(c) of Schedule 1 to the Immigration Ordinance, Cap 115, a person of Chinese nationality born outside Hong Kong before or after the establishment of the HKSAR to a parent who, at the time of birth of that person, was a Chinese citizen born in Hong Kong or has resided ordinarily in Hong Kong for a continuous period of not less than 7 years, is a permanent resident of the HKSAR and can enjoy the right of abode in Hong Kong.
However, for a Chinese citizen born in Hong Kong or has resided ordinarily in Hong Kong for a continuous period of not less than 7 years, his or her child’s eligibility for the right of abode in Hong Kong depends on whether this child has Chinese nationality at the time of birth.
Article 5 of Chinese Nationality Law states that: “Any person born abroad whose parents are both Chinese nationals or one of whose parents is a Chinese national shall have Chinese nationality. But a person whose parents are both Chinese nationals and have both settled abroad, or one of whose parents is a Chinese national and has settled abroad, and who has acquired foreign nationality at birth shall not have Chinese nationality.”
Under normal circumstances, having permanent resident status in a foreign country (that is, having resided abroad ordinarily and not being subject to any restriction on stay) will be treated as having settled abroad.