******************************

Hong Kong is moving forward to reinforce its position as Asia's premier international business centre, the Chief Executive, Mr Tung Chee Hwa, said today (Saturday).

Speaking at a meeting with the visiting French Prime Minister Lionel Jospin at Government House, Mr Tung said that Hong Kong was fully committed to the maintenance of free and open markets, which had been the cornerstone for our success.

"However, as the flow of capital becomes faster and freer between nations, there is a need to have a new global arrangement to monitor these movements to ensure greater transparency and more orderly transactions.

"We look upon France and other G7 countries for leadership to strengthen international cooperation in devising new rules for the globalised financial markets," he said, when exchanging views with Mr Jospin on the global and regional economic situation.

Mr Tung explained to Mr Jospin recent moves taken by the Government to maintain the integrity and ensure the smooth operation of our free markets.

"These defensive measures are necessary to protect the interests and restore the confidence of the public and the investors when they are under threat.

"We have also proposed measures to further strengthen the discipline and transparency of the markets. These measures are aimed to ensure that the marketplace is fair and open to every investor participating in the market and that the regulatory regime is keeping pace with global market development," he said.

The Chief Executive reaffirmed the Government's determination to maintain the linked exchange rate under our currency board system and pointed out that Hong Kong's economic outlook for the medium and longer term remained bright.

"Our economy has been adjusting quickly to uphold competitiveness. The cost of living and cost of doing business in Hong Kong have both moderated. Inflation has been down to its lowest level since 1986. Once the external environment and the local sentiment improve, these will provide Hong Kong with a strong basis for expeditious return to positive growth.

"Over the next five years, we will be spending over $235 billion on infrastructural projects, including three major railways, a number of mega highways as well as reclamation and building projects.

"Hong Kong maintains a level playing field and we welcome French as well as other international participation in the many opportunities provided by these projects," he said.

"Our positive economic outlook is also underpinned by sustained economic growth and further reform and opening up in the Mainland of China," he added.

The Chief Executive told Mr Jospin, who was in Hong Kong for a brief stopover following a visit to the Mainland, that Hong Kong was immensely pleased to see a deepening of the Sino-French relationship.

Mr Tung was pleased to learn from the Prime Minister that France was prepared to continue to be a partner of Asia. They shared the view that the Asian financial turmoil would not be a long-term phenomenon. He was also pleased to note the Prime Minister's reassurance that the French Government attached great importance to Hong Kong.

Turning to increased travel convenience for HKSAR passport holders, Mr Tung thanked the French Government for sending Mr Michel Dejaegher, Deputy Head of Department of Foreigners in France, to Hong Kong in June to study the SAR's case for visa free access.

"We are pleased to know that Mr Dejaegher is satisfied with our boundary control and the integrity of the HKSAR passport. We look towards the French Government for taking the lead in supporting visa free access for HKSAR passport holders in future Schengen discussions," he said.

"The support of the French Government means a lot to us because France is an influential member of the Schengen nations," he added.

He reassured the Prime Minister that both the Central People's Government and the SAR Government were keen to ensure continued success in the implementation of "One Country, Two Systems" as this was important to both China and Hong Kong.

On cultural exchange, the Chief Executive told the Prime Minister that he was pleased to recent progress made in the collaboration of research efforts in immunology, waste and water management between local universities and French research institutes.

"We will press ahead with these research collaborative efforts," Mr Tung said.

The meeting was attended also by the Chief Secretary for Administration, the Financial Secretary, the Secretary for Trade and Industry and the Secretary for Security on the Hong Kong side and the Secretary for Education, Research and Technology, the Secretary for Transport, Equipment and Housing, the Minister for European Affairs and the Ministry for Industry on the French side.

It was followed by a dinner attended by some 120 guests, who were treated to a traditional Chinese meal. Mr Jospin will leave Hong Kong later tonight.

End/Saturday, September 26, 1998

NNNN