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Following is the transcript of a question-and-answer session given by the Chief Executive, Mr Tung Chee Hwa, following his speech at the Far East Economic Review Conference this (Wednesday) afternoon:

Question: The role of the pegged exchange rate, of the pegged currency, for the prosperity and the stability of Hong Kong and its economy has always been emphasised in the publications and the public statements of the bank, (Bank of America) and we will continue to do so. This is a request and a question. Do you think that your administration will be able to do a great deal more in view of the very large amount of negative publicity that the pegged exchange rate system is receiving right now, in putting in front of the Hong Kong people, very starkly, very bluntly, very clearly, both the costs and the benefits of the system and the dire consequences if it was to be lifted and abolished right now? This is not a matter of frightening people, it is a matter of actually educating them.

Mr Tung: In fact, in Hong Kong I think there is a general agreement and consensus that the peg must be maintained and this is not just amongst the bankers or the politicians or the business community, I think there is a very widespread common agreement that we must maintain the peg. And we will maintain the peg. Could we do a better job? I am sure we can. I was visited, yesterday, by a visitor from overseas who made exactly the same point to me, to do better overseas to show (a) the reasons why we are doing it, and (b) our determination it will be done. And we will do it. Thank you for reminding us.

Question: Chief Executive, the elections to the Legislature have been held and they were very successful. Some of the legislators who were elected this time are now questioning your legitimacy. They point out that you were chosen by 400 people whereas they were elected by sometimes over 100,000 people. What do you have to say to that?

Mr Tung: You know Frank has asked me to go on to his programme on TV, Newsweek, and I know he is always very difficult and so far I have successfully avoided him - until now. Frank, I was chosen by Hong Kong, by the people of Hong Kong in accordance with our Constitution, and I will govern and run Hong Kong in accordance with our Constitution, the Basic Law. I do not feel any other way. I am the chosen Chief Executive and this is a strongly executive led government, and I want to make sure it is going to be kept that way.

Question: A question on press freedom. You mention rightly that no one feels pressure not to write this or not to write that; there has been no interference from the Government. But a lot of the Chinese press, I think, in particular, would be more worried about interference on their business side, particularly loss of advertising which is the life-blood for a magazine. And I asked this question last year at the time when Beijing Enterprises was listed and oversubscribed and Next magazine, the most popular Chinese media group, could not find an underwriter. This is not a result of your policies or anything from the Government, but is it not a worry when the most popular Chinese media group cannot find an underwriter, and as far as I understand could not even find a holding bank to take their cheques and some of the banks told them they would have to check with Xinhua.

Mr Tung: Well, I am afraid I am not aware of the details of these cases. I have heard all this hearsay talk but I have to say Hong Kong is a free market and the businessmen decide for themselves what is good for them, what is good for their bottom-line, what is good for profit. But what the Government wants to do is to make sure freedom of the press will continue to be here. And I think we will absolutely hold that line, and we will continue to do that. But what the businessmen do is really up to the businessmen to decide.

Question: Just now you mentioned that the Government does not want to see property prices collapse. So, in addition to the tax concessions and the spending increases contained in the budget, anything else the Government is planning to do to stabilise the property market?

Mr Tung: Well, the decline of the property market has a number of reasons. One of them is because of the credit crunch. And the other is that if you look at the production of the private sector properties and the public sector properties being built, part of this year, next year and the year after (there) will come more properties being developed and ready for occupation than almost at any other time before. So on the one hand you have a credit crunch which is reducing demand, on the other hand you have a supply side problem. And this is typical of an economic adjustment because when it comes it does not come with one reason - it came with two reasons.

It reminded myself of when I was in shipping before, that the whole world was making so much money in shipping in the late 60's, everybody went ahead and built tankers - tankers after tankers after tankers. The world was going to be flooded with tankers anyway. Then there was the '73 oil crisis when demand for oil just suddenly collapsed so the resultant tanker crisis went on for a long, long time.

I don't think this property crisis will go on for a long, long time because the fundamental demand is still very strong. In 1997, Hong Kong's population grew by 190,000 people, which is a full 3% of our population, one of the fastest growing anywhere. The key for us is to get the economy going again. The affordability will then be there to start buying. So these are, of course, long term. In terms of short term measures, last week we announced a series of measures which were originally introduced to hit against speculators, and we wanted to send the signal to the market place: we do care about this for property prices.

There are a number of other things we are reviewing and I would prefer to leave it just at that for the time being. Except to say that we do not want to see the property prices really fall any further and that whatever the Government could do, should do, we will do.

Question: I have been very happy to see you and your officials promoting the case of information technology. While information technology is indeed the dragon-head of all technologies today, it is not the only technology and it does not flourish alone. There are bio-technologies, materials, environmental, micro-electronics, and I wonder whether you or your officials will be speaking on those other technologies that together form an infrastructure.

Mr Tung: As you know, one of your good friends, my good friend Mr C.L. Ting, who was until recently President of UC Berkeley, now heads a commission of people of Hong Kong looking at the development of hi-technology, looking at how we can add value through this activity in our economy, and I am expecting that this report will be quite widespread, it will cover all spectrums of technology and how to create more value in all the things we are trying to do. They promised me an interim report in September for my Policy Speech in October, and the final report about six months later. So I hope all those who are in technology participate actively in that process and at the end of the day I am quite confident the report will be a good one.

Question: Mr Chief Executive, President Clinton will be here soon and could you tell me what you would like to hear from President Clinton, other than the unconditional extension of Most Favoured Nation status to China?

Mr Tung: I had the pleasure of spending some time with President Clinton when I was in Washington. I was deeply impressed by his grasp of knowledge of China and of what is happening in Hong Kong, and I look forward to talking with him about what has happened six months - it has been six months since I saw him - actually, it is more than six months it is now nine months since I last saw him. I think obviously I will be keen to listen to what he has to say but what I want to tell him is how well we are doing under "one country, two systems", how well we are moving forward. And secondly is that we need, really, the United States and I think at this moment more so Japan, to really come in to move the economy again in Asia because it is really important that the world's first and second largest economies in the world need to be a lot more involved at this time. So these will be some of my messages.

End/Wednesday, June 10, 1998

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