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Following is the full text of the speech delivered by the Financial Secretary, Mr Antony Leung, at the Dragon Boat Dinner in London (June 26, London time):

Minister, President, Chairman, ladies and gentlemen,

It's good to be back in London. I am especially glad to be with so many steadfast friends and supporters of Hong Kong.

It is a pleasure to join you tonight, just a few days before the 4th anniversary of the Hong Kong SAR. It is also the first Dragon Boat Dinner of the new millennium. This is a fine tradition and I hope it continues. It helps to cement the strong and special bonds between the UK and Hong Kong, so well defined by the Minister.

It also provides an opportunity to keep our key supporters, people such as yourselves, up to date with what is happening in Hong Kong. On this occasion it also happens to be a golden opportunity to introduce myself as the new kid on the block and to give you an idea of what I see ahead for Hong Kong.

This is my first overseas trip since stepping into the Financial Secretary's office almost two months ago. It has been a busy and fulfilling period. I'm on a steep learning curve. As you know, time waits for no man, especially in Hong Kong. My mission now is to work hard to help make Hong Kong even more successful and, most importantly, to ensure that we develop economic opportunities which benefit the many, not just the few.

It is easy for me to be excited about my new job because I believe Hong Kong has an exciting future. I know from 28 years' experience in the banking business the kind of rewards Hong Kong has to offer. It is a great city on the verge of becoming even greater. There are plenty of reasons to be optimistic. But I know, as do many people in Hong Kong and here tonight, that we face some fairly hefty challenges to claim the title as Asia's world city.

The most immediate is to navigate safely through the present unsettled global economic waters. We are closely monitoring the economic signals coming from the United States and Japan. Having met Gordon Brown and Eddie George over the past couple of days, I know you are watching just as intently. We are doing what we can to minimise the effects of the global slowdown, but an economy as open and transparent as Hong Kong's is extremely vulnerable to external factors, good and bad.

For all that, we are still forecasting GDP growth of 3% for the year. China's economy is expected to grow by between 7 and 8%, and the Mainland's continuing robust economic performance may well provide the kind of buffer for us that's not available to some others in the region.

As the Minister has pointed out, Hong Kong has enjoyed a remarkably successful transition, and we are gratified by the encouragement and support we have received from the British government over the past four years. But one still hears questions about our future. Are we becoming just another city in China? Has our economy lost its vital spark? Are we in danger of losing out to Shanghai? Or Singapore? Or even Sydney? My answer to all of these questions is 'no'.

Let me tell you why. In my view, Hong Kong plays two distinct but complementary roles. One is our position as the pre-eminent gateway to China. The other is as Asia's major hub for finance, logistics and business.

We must give full play to both of these strengths. We must leverage our existing network of contacts, acumen, experience and the ties of language and culture to make the most of a rapidly opening up and increasingly sophisticated Mainland economy.

At the same time we must continue to attract and retain international business, investors and human capital to provide the added-value we need to boost our competitiveness. Not just in the region, but globally. Hong Kong is a player on the world stage. We must be the first and logical place that comes to mind in terms of business and investment in China, as well as the rest of Asia.

But Hong Kong can never afford to be complacent. We must earn our stripes. That's why the economy is in the process of restructuring from an over dependence on property to one that is equipped to leverage the information age.

I don't have to remind this audience - but I will - that fate has blessed Hong Kong with the premier location in East Asia. Our deep-water port is one of the world's finest. We have a magnificent world-class international airport. If you are an executive based, say, in Singapore or Kuala Lumpur and you have business in Tokyo, Seoul, Beijing or Shanghai you would spend the best part of a full working day sitting in a plane getting to your destination. On the other hand, for an executive based in Hong Kong those cities, including Singapore and Kuala Lumpur, are only a half day away, or less. You have that extra half day for business.

International corporations have made the most of Hong Kong's location and advanced infrastructure. Investors and traders from around the world have gone to Hong Kong to capture opportunities in China. But they also use Hong Kong to capture and create opportunities elsewhere in the region. British firms have been at the forefront of this. Britain is the 5th largest investor in Hong Kong with a portfolio estimated in value at around ¢G17 billion. Some of the British firms like Jardine's remain the largest private sector employers in Hong Kong.

Of course there have been changes since July 1997. That's natural in a dynamic society such as ours. But the things that matter most have stayed the same. International companies in Hong Kong know they compete on an equal footing with local businesses. It makes no difference to us whether you come from Timbuktu or Tsim Sha Tsui. Every business based in Hong Kong is subject to the same low rate of profits tax. That's 16% if you don't have a very good accountant. Companies and individuals are protected by the same laws upheld by an independent and respected judiciary firmly rooted in the English common law tradition.

Our immediate hinterland - the Pearl River Delta - is one of the fastest growing regions in the world. The population there is 40 million. Consider that for a moment : that's as many people as you have in Sweden, Austria, Greece, Belgium and Ireland combined. They all speak the same language.

The abundance of land and labour in Guangdong Province that has fuelled our transformation from a manufacturing to a services economy, has lifted living standards on both sides of the boundary. We have stepped up our discussions with the Mainland authorities on ways to increase collaboration with our neighbours in the Pearl River Delta on a range of issues.

This includes, among other things, improvements to cross-boundary transportation and new infrastructure connections without compromising our status as a separate Customs and Immigration jurisdiction. That's important. Maintaining the integrity of the high degree of autonomy bestowed on Hong Kong by the Basic Law is vital to the success of 'One Country, Two Systems'.

China's accession to the World Trade Organisation will bring more opportunities for Hong Kong - not less, as some people believe. We estimate that accession will add another 0.5 percentage point to our GDP. We have the expertise, the contacts and the track record of working and trading in the Mainland to profit from the next stage of the country's dramatic opening up to the world.

We are in the driver's seat to make the most of this. No doubt we will lose something because some may choose to deal directly with the Mainland. But we will more than make this up as our share of a larger China economic pie becomes even greater.

I don't underestimate the challenges involved as the economy changes shape. Let me address one of them. We are constantly looking for bright and talented people to help drive growth and add value to our economy. We have recently revived a scheme to attract talented Mainland professionals to Hong Kong, initially in the IT and financial services sectors. Longer term, we are moving ahead with reforms in our education system to equip our young people with the skills and confidence in their own abilities to succeed in the knowledge-based economy and to engender a desire for lifelong learning.

On the other hand, Hong Kong's financial markets are becoming more popular with Mainland enterprises seeking to raise capital. They understand they have a better chance of attracting investors if they adopt the international standards of accounting and accountability that underpin market discipline in Hong Kong. Conversely, the presence of new Mainland listings adds greater depth and choice to our financial markets. Win-win.

We not only want Hong Kong to be a better place in which to work. It must become a better place in which to live. Our beautiful Victoria Harbour will be returned to the people by making the most of the shoreline on both sides of the harbour. A marvellous 100-acre site at West Kowloon, commanding a spectacular view of the Hong Kong Island skyline, will become a new precinct for the arts and culture - our own West End with a Broadway skyline. The opening of Hong Kong Disneyland in 2005 will add new strength to our position as Asia's most popular tourist destination, as well as boost our economy. We want to be able to offer our citizens and visitors a lifestyle rich in culture and variety, so that people think of us as the London or New York of Asia.

We are also doing a lot to improve our air and water quality. We already have better air quality as more LPG taxis replace diesel taxis and buses switch to environmentally-friendly fuel. The number of hours the air pollution index exceeded 100 last year was half that in 1999.

Most importantly, I want to assure you that Hong Kong moves forward with an unwavering commitment to preserving and enhancing our institutional strengths, the legacy of British administration and a bedrock of 'One Country, Two Systems'. Hong Kong has flourished because we are a free society under the rule of law. International companies have faith in our business environment because they compete on an equal footing and trust our legal system. Our entire community is deeply committed to preserving the rule of law and the free and unfettered flow of information.

Clean and efficient government is another part of our heritage. Our civil service is one of the best-trained and most dedicated in the world - not just the region. Our official languages are Chinese and English, and we acknowledge that we need to do more to improve the standards of both, particularly English. We know that one of the best ways to attract business, retain talent and encourage enterprise is to give people the freedom to enjoy the fruits of their labour through a low, simple and predictable tax regime. That's not going to change.

With such solid foundations, and a genuine and deep-seated desire to improve ourselves, I very much look forward to a bright future for Hong Kong as Asia's world city.

Thank you very much.

End/Wednesday, June 27, 2001

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