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Follows is a speech by the HKSAR Chief Executive Tung Chee Hwa at a US Chamber of Commerce luncheon in Washington D.C., today (April 7, US time):

Ambassador Johnstone, Mr Greenberg, distinguished guests, ladies and gentlemen,

First of all, I'd like to thank Hank Greenberg for his warm and kind words of welcome. Hank and I have been very good friends for many, many years and it is great to see him again looking so happy and prosperous. I suppose that means the insurance business must be doing OK amongst all the dot.coms and dot.nets we hear about every day. It just goes to show that you don't need to teach an Old Economy veteran New Economy tricks.

I must also thank the Chamber for once again providing me with such an impressive forum in which to speak. The U.S. Chamber of Commerce is one of the world's most important business groups and has long been a good supporter and friend of Hong Kong. It is an honor and a privilege to have been asked back to talk to you after my last visit in September 1997. I know there is still considerable interest in what is happening in our part of the world. And I find that very reassuring.

The last time I was here in September 1997 I called on the President and many other senior members of the Administration and Congress. This time around I've been just as busy. I had a very good meeting with the President this morning, as well as with Secretary Albright and Sandy Berger. Yesterday, I had a full day of Congressional visits which included meetings with Senate Majority Leader [Trent Lott] and House Speaker [Dennis Hastert]. We had a lot to talk about, and of course we talked about China's accession to the WTO and the upcoming PNTR debate. I will talk more about this a bit later.

Today, as in 1997, I stand before you as a friend; as someone who has lived and worked in the United States for almost a decade; as someone who saw his kids born and brought up here; as someone with a deep admiration for the enormous spirit and enterprise of the American people; as someone who wants to see that spirit and enterprise at work in Hong Kong. I hope that my visit will help reinforce and enhance the strong bonds that have existed between our two communities for many, many decades. It is my strong desire that our friends and supporters in America understand, plain and simple, that Hong Kong is as vibrant, thriving and cosmopolitan as it ever has been; that we are equally, if not more, committed today than at any time to the rule of law and the principles of a free market and an open economy.

Last time I visited Washington it was barely 2-1/2 months after the Handover. Since then a lot has happened in Hong Kong. We have had to face not one, but two distinct challenges as a community. The first was political, and that was how to make a success of the untested concept of 'One Country, Two Systems'. The second was economic, and that was how for Hong Kong to achieve a recovery from the longest recession in our history brought upon us by the Asian financial crisis. That these two challenges were with us almost simultaneously made our work much more difficult. Today, however, we can take pride in the fact that with the support of the entire community we have met these challenges head on and in the process emerged with renewed strengths.

Anybody who has been to Hong Kong since the Handover can see that 'One Country, Two Systems' has been transformed from a concept into an everyday reality. It is working well. We have been given maximum support from our national leaders. At the same time, it has been made clear time and again, that it is up to us in Hong Kong to chart our own course - Hong Kong people running Hong Kong with high degree of autonomy as stipulated in the Basic Law, our constitution.

Everything that has happened in Hong Kong since the Handover rests squarely on the shoulders of people in Hong Kong - people like me, members of the Executive Council, the Legislature, the Judiciary and my colleagues in the civil service. We are the ones who have been making the decisions. The Basic Law provides a constitutional framework for the Hong Kong Special Administrative Region. It clearly prescribes the social and economic systems in Hong Kong, which are different from those in Mainland China. It guarantees the independence of our judiciary. It allows us complete financial autonomy, and an independent monetary system. We maintain our status as a separate Customs territory to curb the trade in strategic commodities, drugs, illegal transshipments and the infringement of intellectual property rights. We remain a separate member of the WTO as well as other fora such as APEC and the World Customs Organization. Our political structure is evolving in accordance with the provisions of the Basic Law. The first election of the legislature was held in 1998 and the second one will be held later this year.

The evolution of constitutional law in Hong Kong has been a new experience for us and our international supporters. Since July 1997 we have had, for the first time in our history, a written constitution. Parts of the Basic Law have already been tested in our courts - this is no surprise given the importance that Hong Kong people place on the rule of law. These challenges, and the robust public debates on rule of law issues that have accompanied them, are a healthy sign. It shows that the rule of law remains intact; and that constitutional issues can be justly and efficiently dealt with by Hong Kong's independent Judiciary.

In addition to high-profile constitutional cases, every year, hundreds of thousands of cases are dealt with in same manner as before the Handover. We have a tried and tested legal system, that is easily understood and trusted by Hong Kong people and the international community. We fully understand that our common law system is one of our greatest strengths - a bedrock of our success - and that we must, and will, do everything we can to protect the rule of law in Hong Kong.

So, 'One Country, Two Systems' is working well in Hong Kong. We are proud of what we have achieved in almost three years since Reunification. But it would not have been possible, really, without the support of Hong Kong people, the international community and the unwavering determination of the Central Government to make the 'One Country, Two Systems' a reality.

This brings me to the second challenge we have had to face since the Handover and that was how to recover from the recession caused by the Asian financial crisis. In two successive budgets, we introduced tax cuts and freezes or reductions in government fees and charges as a means to encourage consumer spending. We also decided to proceed with massive investments in infrastructure such as roads, railways and schools, not only as a means to stimulate the economy but also as a way to build a better future for our community. With the recovery of the regional economy in Asia, and the strength of the economy in North America, Hong Kong's economy is now rebounding strongly. In the last quarter of last year, our economy grew by 8.9 per cent, granted from a low base. We expect the economy to grow by 5 per cent in 2000.

By all counts, we have managed the challenges we faced well. However, while we were devoting attention to managing these challenges throughout the past two-and-a-half years, we also continued to keep our eyes firmly focused on the future. How to meet the challenges of the knowledge-based society of the 21st Century? How to achieve equitable, sustainable and long-term economic growth? Where do we want to be as a community in 10, 20 or 30 years time?

From the very beginning, we recognized that as we move into the 21st Century, we are faced with yet more far-reaching challenges. First, the world's economy is becoming more globalized as a result of free trade and advances in information technology. Second, the Mainland's success in reform and the implementation of open-door policies in the past two decades has brought about changes in the economic relationship between Hong Kong and the Mainland. Third, Hong Kong's economy is now undergoing another round of economic restructuring. New challenges and opportunities are emerging. Let us take a closer look at these challenges.

International trade has become increasingly open in the past 50 years. New technology, particularly advances in information technology, are not only changing the way we live, but also the way we do business. Transaction procedures have been streamlined. Suppliers from all corners of the world can now engage in keener and more direct competition. We in Hong Kong will only be able to compete successfully in the world market if we can provide a wide range of high quality, innovative and technologically sophisticated products and services, and have good access to information.

Two decades of rapid economic growth in the Mainland have continued to narrow the gap between Hong Kong and the key cities there. The Mainland has a wealth of talented people. Their knowledge and capabilities in many areas have advanced rapidly as a result of extensive international exposure in recent years. Their diligence and frugal lifestyle also give them a competitive edge. Unless we in Hong Kong consciously improve, our lead will disappear. We are faced with great challenges. But we are also seeing great opportunities. According to the World Bank, China's gross national product currently ranks 7th in the world, and will rise to 3rd or 4th place by 2020, with an enormous cumulative growth in the interim. Nothing can stop China's advance. And as China's economy grows, Hong Kong stands to benefit greatly if we can play an active part in this process.

With the bursting of the asset price bubbles, and currency devaluations in some Asian economies during the financial turmoil, competition in the region has intensified. Hong Kong cannot count on a recovery led by asset inflation. Also, some labor-intensive service industries in Hong Kong have followed the lead of the manufacturing sector and moved to the Mainland or other overseas areas. These factors, together with globalization and the development of the Mainland's economy, are leading to another phase of economic restructuring for Hong Kong.

A little over two years ago, I announced the formation of a Commission for Strategic Development to help Hong Kong formulate a long-term plan for the future. Drawing on the commission's advice, we will position Hong Kong, not only as a major city in China, but as the World City in Asia, with a status comparable to that of New York in the Americas and London in Europe.

New York and London - and I'm sure Washington - are cosmopolitan cities with a great depth of talent in culture, technology and education. They are vibrant economies and possess the financial strength to serve the region and the world in areas such as finance, trade, tourism, information and transport. They are also home to numerous national and multi-national enterprises. Their solid economic foundations have made it possible for their residents to enjoy a relatively high average income.

Hong Kong already possesses many of the key features common to these great cities. We are already an international financial center, a popular tourist destination and hold leading positions in trade and transportation. And we are consolidating our existing strengths to ensure we do become a world-class city.

One of our greatest advantages in taking forward this vision is our links with Mainland China. Over the past 20 years, Hong Kong has benefited greatly from China's open door policy. The door is about to be opened much wider. With China's accession to the WTO, inward investment into the Mainland will make a quantum leap. As one of the major conduits of these capital flows, Hong Kong stands to benefit.

So, too, do the more than 1,100 US companies which have invested over US$21 billion in Hong Kong. The American Chamber of Commerce in Hong Kong - the largest AmCham outside of the U.S. - has long supported China's entry into the WTO. No doubt US businesses will make good use their presence in Hong Kong to leverage the significant opportunities created by China's entry to the WTO. It has been estimated that China's trade as a result of accession will double within the next six years. So, even if the US market share remains unchanged, US exports could grow from US$21 billion in 1999 to US$42 billion by 2006.

But I believe US market share will likely increase, given the strength of American companies and the substantial openings in the Mainland market in many US priority areas. There will be big tariff reductions for many goods and significant liberalization in the services sector. Areas covered will include agriculture, high technology, chemicals, wine, wood and paper, autos, banking, insurance, telecommunications, distribution and trading rights, audio-visual, professional services and travel and tourism.

From another angle: Hong Kong consumes around US$1,000 worth of American goods per person each year - more than almost anywhere else in the world on a per capita basis. Hong Kong has a population of 7 million. China has a population of 1.2 billion. Imagine the opportunities for US business if they attained a fraction of the market penetration achieved in Hong Kong.

I would also like to point out that China's accession is not simply about business opportunities. It is also about strengthening economic stability, stability generally, in the region. It is about ensuring that differences on trade issues are resolved sensibly. It is about developing the global economy on responsible, rules-based principles.

The rules-based system under which we operate has facilitated and encouraged regional and international co-operation on the full range of trade and investment issues. This has created the foundation upon which emerging economies in particular have been able to lift living standards for millions of people and build more prosperous, stable societies. Consider what a contribution strong, healthy Asian economies can make to global prosperity and to American opportunity.

So it is surprising to me that there is so much debate here in the US on the issue of PNTR for China. It appears so much to be a common sense issue. The US trade agreement with the Mainland is a win-win for US businesses. China will be opening up its markets quite dramatically, while the US need not make any concessions. China is set to become a member of the WTO. The issue is whether US business will be able to participate in the Mainland's substantial market opportunities.

I am delighted that the Congressional leadership are committed to a vote in the House in late May, and in the Senate in early June. At the end of the day, I am confident that Congress will make the right decision in the interests of the US and in the interest of the multi-lateral trading systems which the US has done so much to help create and has received so much benefit - in other words, a positive vote for PNTR.

At the dawn of the 21st Century, I see China's economy continuing to grow, and in time become one of the largest in the world. I see the economy of Asia recovering from the impact of the financial turmoil of the past two years and actively re-emerging in size as large as that of the European Union or NAFTA. Hong Kong, with our unique relationship with the Mainland of China, and our prime position within Asia - within five hours flying time of more than 50 per cent of the world's population - is ideally situated for those who wish to participate actively in this growing nation of economy.

The US and Hong Kong have always had a close and special relationship. More than 50,000 American citizens are living in Hong Kong. Tens of thousands of Hong Kong people have emigrated to the States, while thousands of our youngsters are studying here in your schools and universities. These very strong people-to-people bonds are a great asset for both of us. And I hope we can use these existing bonds of family and friends, as well as business, to take our relationship to new heights in the 21st Century.

A lot is happening, a lot will be happening in Hong Kong over the next few years. But what we are doing now is simply laying the foundations for Hong Kong to really surge ahead in the next few decades. We want to develop a Hong Kong that is mentioned in the same breath as New York and London - a World City without parallel in its time zone and continent.

You would, of course, expect me to upbeat about Hong Kong's future. But I would also say come and see for yourselves, do your own research. I am sure that you will come to the same conclusion as I have - that Hong Kong is destined for even bigger and better things.

Thank you very much.

Ends/Saturday, April 8, 2000

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