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Following is the transcript of a media session given by the Financial Secretary, Mr Antony Leung, at the Hong Kong Economic and Trade Office in Washington today (June 5 Washington time):

Financial Secretary: I am very pleased to see all of you. This is my first visit to Washington, D.C. since I took up the job of Financial Secretary. I planned to be here actually late last year, but because of the September tragedy I postponed the trip, but finally I am here.

Today I met with a lot of people. I had breakfast at the U.S. Chamber of Commerce. I met with old friends. A lot of the Chamber's members are also members of the US-Hong Kong Business Council. I was a member of the Council before I joined the government, so we chatted about developments in Hong Kong and obviously developments in Asia in general.

I met with members of the American Enterprise Institute and exchanged ideas on Hong Kong's developments, as well as developments in China

Afterward, I met with Chairman of the Federal Reserve Board, Alan Greenspan. We had a very active dialogue in a very friendly atmosphere. Obviously we discussed developments in Hong Kong and China and I asked him about his views on the American economy.

Overall, I would say the meeting was very friendly, and to me, very productive.

In the afternoon, I met with the Washington Times and took the opportunity to tell them what is happening in Hong Kong, particularly with regard to the economy.

And lastly, I met with Congressmen Jim Leach and Steve Chabot (Republican-Ohio and member of International Relations Committee). We exchanged ideas on the latest developments in Hong Kong, particularly in relation to the economy.

So overall, I think today has been very productive and I have achieved my objective of getting to know what is going on here; explaining to old friends as well as new friends what's happening in Hong Kong.

Reporter: What did Greenspan say about the U.S. economy? Did you talk about U.S. dollar rate in the international market?

Financial Secretary: The protocol is that I will not relay what he told me about the American economy. I think overall we are happy that the American economy is in good shape.

Reporter: How long did the meeting last?

Financial Secretary: It lasted 45 minutes. It was supposed to last half-an-hour. We had a very good discussion.

Reporter: What did you tell him about the Hong Kong economy?

Financial Secretary: Well, clearly I told him about the restructuring of the Hong Kong economy; that we are bouncing back from the second recession in five years and that we are continuing our restructuring. We are really doing a lot of things to improve the business environment so that the private sector can essentially take over and take the economy forward.

There are quite a lot of things the Hong Kong government is doing to improve the business environment, including really reducing the size of the government in relation to the size of the GDP, which will enable the market to have more room to play.

We are increasing the market access for our corporations, particularly in improving the economic flow with the Mainland, which includes people flow, cargo flow, funds flow, information flow and services flow. Obviously, we will continue to invest in human resources and training.

So, I told Chairman Greenspan we are doing all these things and that we will rely on the private sector to really drive the economy forward.

Reporter: Any indication that American businesses and analysts are increasingly seeing Hong Kong as economically irrelevant as China opens?

Financial Secretary: Well, they haven't expressed to me that Hong Kong will become economically irrelevant, but obviously they are asking a lot of questions on what the role of Hong Kong is after China's accession to the WTO, which is a symbol of really opening up.

I explained to them that Hong Kong has a lot of strengths, particularly the institutional strengths under the "One Country, Two Systems" because under "One Country, Two Systems" we can maintain our institutional strengths including the rule of law, level-playing field, free flow of information, a clean government, and a low tax and simple tax regime. All of these may not be available to the other Mainland cities.

These strengths together with what we are doing, really is to position ourselves as the region's premier financial, logistics, tourism and services hub.

This role will capitalize on the flow the Mainland, as well as in the region and will actually further help the Mainland to grow as well.

I actually quoted numbers that illustrate the point very strongly that since the handover, the number of regional offices and regional headquarters in Hong Kong established by foreign companies have increased by one-third, so the businessmen are really voting with their feet; they're coming to Hong Kong and they're taking advantage of Hong Kong's position as really the region's premier financial center.

I also pointed out to them that while we serve the entire region, we are part of the Pearl River Delta and the Pearl River Delta area, on a combined basis, has a population of some 50 million people. It is a very large consumer market and has a very complete set of economic activities.

With the Guangdong side providing a powerful manufacturing base, a huge consumer market, some agriculture and Hong Kong providing international standards of services, including financial services. So this combination is a very powerful one and one shouldn't' really look at Hong Kong as just a city with 6.7 million people; it really is part of very vibrant Pearl River Delta.

Reporter: Did your discussions centre on political developments in Hong Kong and concerns that some freedoms guaranteed by the Basic Law may be eroded?

The latest example is the terrorism legislative that is being proposed. Did you encounter any concern?

Financial Secretary: The question was asked by some people I met with today and I took the opportunity to explain to them that all the freedoms that we are used to enjoying are still available in Hong Kong.

We still have a very free press and they remain as critical of the Hong Kong government as ever. We have freedom of assembly; a number of public gatherings, as many as before the handover.

The legislation that you talk of obviously is still in the legislature, but really it is taking what the UN has passed and putting it into local legislation.

So, I took the opportunity to explain to people that I met with today, that the freedoms we had are just as available today.

Reporter: Inaudible (economic forecasts?)

Financial Secretary: Well, usually the forecasts are made by the government economist. We just made the forecast in March of this year and now its only June.

Usually at this early stage in the financial year, we would like to have a look at developments in the economy unless there are drastic differences in the assumptions and usually adjustments would not be made until later in the year.

But when we are going to make the adjustments, whether we are going to make the adjustments and how much we are going to adjust, I think I will leave it to the economist.

Report: Are you prepared to say that the current estimate is on the low end of the range that you can foresee?

Financial Secretary: Well, I pointed out that our forecast has been on the low side compared to the forecasts made by the various banks, made by the IMF.

After the release of the first quarter numbers, we didn't make any adjustments to the forecast because it is still probably a bit early in the financial year.

Reporter: Do you find it encouraging that the US dollar is weakening, because that would help revive Hong Kong? Have you, or do you intend, to do anything to make the case for allowing the dollar to slide?

Financial Secretary: As a former trader, currencies moves up and down. I'm not sure the US dollar is on a downtrend because the fundamentals in the U.S. are still very strong.

So rather than betting our future on a weak dollar, I would rather address the fundamentals and make sure our economic systems remain flexible.

Reporter: (Inaudible)

Financial Secretary: I actually don't think the benefit is that much; I think it is mildly positive if the dollar is weak.

Reporter: When you meet with Larry Lindsey tomorrow, will you discuss how U.S. economic policies affect Hong Kong?

Financial Secretary: The U.S. is a major trading partner of Hong Kong and our currency is pegged to the U.S. dollar, so obviously the U.S. economy is very important to us.

I'll take the opportunity to understand his views on the U.S. and obviously explain what we are doing in Hong Kong.

Reporter: Did Greenspan ask you anything specific about the US dollar peg?

Financial Secretary: No, he didn't.

Reporter: Did you mention Hong Kong's concerns over U.S. protection measures?

Financial Secretary: I did voice it to the businessmen, saying we are concerned about the possible increase in trade barriers because Hong Kong depends so much on trade and I am a firm believer in free trade because free trade actually increases world demand. And whenever you see trade barriers being erected, economies will get hurt.

So, I did indicate to the businessman that I met with today that I am concerned about the seemingly increasing trade barriers, but I think, as businessmen they agree with me.

Reporter: Will you raise it with Mr. Lindsey at the White House tomorrow?

Financial Secretary: I think that would be a topic on which I would listen to his views.

Reporter: There are reports out of Taipei that Taiwan and Hong Kong negotiations over a new aviation agreement have resolved concerns on pretty much all of the remaining issues involved, can you give us anything on that?

Can you give us an idea of where you see those negotiations standing now?

Financial Secretary: Well, I hope we can reach an agreement soon, or should I say that I hope we can actually sign the agreement soon, but I think it is up to the sides to disclose the details after the agreement is signed.

Reporter: One of the things is that apparently Hong Kong is insisting that the agreement be signed not by the two governments, but by the airlines; the Hong Kong airlines and the Taiwan Airlines Association. Is that accurate?

Financial Secretary: I think the procedure would follow what has been done in the past.

Reporter: (Inaudible: Hong Kong restructuring)

Financial Secretary: I can't tell you with precision when the restructuring period will be completed.

Reporter: If you don't have a target for the restructuring, what is the benchmark for a Hong Kong revival; by what time do you hope to see a turnaround?

Financial Secretary: There are too many variables that Hong Kong can only control some, but not all. So, I think it would not be realistic to set a fixed target on the economy. Hong Kong being such a free and open economy, we are subject to the influences of our major markets. And our history has shown that really it is the private sector that should be doing most of the work. The private sector, I sincerely believe is a better allocator of resources, a better creator of jobs, a better engine of growth.

What a government should do really is to make sure that we prepare the ground and prepare a very good business environment for businesses to exercise their power. And whether Hong Kong will resume growth and at what level, I will leave it to the private sector. Obviously, we believe that after the restructuring there will be a bright future for Hong Kong. But as for predicting when the Hong Kong economy is going to grow at a very fast rate, we have too many variables.

Reporter: Among all of these variable and indicators, what to you would be the most encouraging sign?

Financial Secretary: I think the signs would be, clearly trade is very important. But more and more, since Hong Kong is largely dependent on services, export of services is very important. Export of services would include tourism, which we are already seeing rebounds. It will include other services we are exporting including in the financial markets, so we are looking at indicators such as turnover in the stock market, re-export in trade. Right now we are seeing positive signs in a number of indicators.

One very important sector is the property sector. In the property sector we have seen real turnover.

Reporter: In regard to concerns that China may not be able to implement all of its WTO obligations, has anyone asked if Hong Kong would facilitate, with the Commerce Department or other organizations, to help the Mainland develop more comprehensive legal and financial services?

Financial Secretary: I have not received such a request. But I believe having looked at the history of the Mainland for the last 50 years; they have been obliging by international agreements extremely well so I have no reason to suspect that they will not be able to comply.

Reporter: (Inaudible: US container security initiatives)

Financial Secretary: We are still waiting for the details. We are obviously keen to cooperate with the U.S. government on measures to counter terrorists. But on the container security initiatives, one has to take care of the existing mechanism to control various strategic goods, including weapons of mass destruction. And in this area, Hong Kong has a solid reputation.

End/Thursday, June 6, 2002

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