In World War II the USA had been technically an ally of both the Soviet Union (the leader of the communist world) and China, but in 1949 the Soviet Union had become a nuclear-armed rival and China had been taken over by Mao's communists. In February 1950 an obscure senator, Joseph McCarthy of Wisconsin, announced that communists were infiltrating both the government and the army. In June 1950 the communist regime of North Korea launched an invasion of US-supported South Korea. The USA invaded the peninsula in September 1950 and quickly pushed back the North Korean troops and even captured Pyongyang. In October 1950 Mao's regime invaded North Korea to push back the USA. And so for the first time the USA was at war with China. The war ended in 1953 with a stalemate. In 1950 the USA imposed economic sanctions on Mao's regime, which made it illegal for Chinese Americans to send money to their relatives in China or to do business with China. At the same time, the Chinese Communist Party, especially in Guangdong province, was pressuring the relatives of Chinese Americans to ask their American relatives to send money. Remembering what had happened to Japanese Americans during World War II, Chinese Americans were fearful that a similar fate awaited them. They often went out of their way to show their loyalty to the USA and their hostility towards Mao's regime. For example, in 1950 San Francisco's Six Companies established the Chinese Six Companies Anti-Communist League. In 1950 CalTech's rocket scientist Qian Xuesen, accused of being a communist, was placed under house arrest for five years and then deported to China in a prisoner's exchange. In 1955 Everett Drumright, the US consul-general in Hong Kong (the only place where Chinese could apply for a visa to enter the USA), wrote a report that described the Chinese refugees applying for asylum as potential communist agents, and hinted that many recent Chinese immigrants were illegal immigrants. This was actually true. During the "exclusion" years, many Chinese used the “paper son” system to enter the USA: they paid a Chinese American to declare them close relatives, the only remaining way to be admitted to the USA. The US government launched a large-scale investigation of the "paper son" system and in 1956 the Six Companies agreed to cooperate with the investigation and encouraged immigrants to confess. It didn't matter that most "paper sons" were not communists. They lived in constant fear of being discovered and deported. The new Chinese immigrants arriving by ship were detained on Angel Island and subjected to weeks of interrogations to determine their true identity.

Close to two million refugees flooded to Hong Kong during Mao's dictatorship to escape from political persecutions, from the famine of the Great Leap Forward (1955-61) and from the terror of the Cultural Revolution (1966-76). Hong Kong's economic miracle of the era was largely fueled by the low-paid work of these refugees that enabled an export manufacturing boom.