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The following is the transcript of the Question and Answer session given by the Financial Secretary, Mr Antony Leung, today (November 14) at the 2002 Asian Venture Forum (English only):

Question: (inaudible)... going forward?

Financial Secretary: Definitely. Definitely, we will continue our belief in the free market with limited but proactive government. We truly believe in the free-flow of information and will continue to maintain a tax regime that is very simple and low tax.

Question: When the Innovation and Technology Commission was set up and we were having discussions about five years ago about how to create or how to develop more of a venture capital - and I mean a technology-based venture capital industry here in Hong Kong - I suppose one of the major issues that was referred to and discussed, and I think probably agreed on, was that the cost base in Hong Kong is very high for small venture capital companies; companies consisting of bright young executives but not necessarily people who could afford the high cost that Hong Kong has. So following on, really, one of Dan's questions: How consistent is the Government's attempt to get the property prices up, how consistent is that proposal announced today, with the development of a venture capital platform here in Hong Kong? And I mean a venture capital platform that supports innovation and technology.

Financial Secretary: Well, firstly, I believe you are aware that our cost base is much lower than before. Property prices, as measured by the price of apartments - residential flats - have come down by 65 per cent. So the just announced measures to stabilise the property market are targeted towards, in a way, managing the supply and demand of flats better, so that the price would not be falling forever. Because, as you know, too much of an overshoot on the downside can create very negative financial impact both for the households as well as for the Government. So that is why we announced those measures. And the intention is not to push it back up; definitely not to the pre-1997 levels, it was just way too high.

On that note, you should also be aware that the price of offices as measured by rentals, has come down by just as much. And there, the Government has not really so-called interfered, as some press report, in any way. So for the users like you, the price of property in Hong Kong has come down by just say two-thirds from the very top and chances are, in the medium term, it will be even cheaper. Salary levels have been moving down as well, which in a way you can say is bad as far as local consumption is concerned, but on the other hand it shows the flexibility of our system. You may say that all these downward corrections are really bad news.

Now, let us look at the good side. Despite all these corrections, the banking sector in Hong Kong remains extremely healthy. The average capital adequacy ratio of the local incorporated banks stands at 16 per cent. Again it shows the resilience of our economy. Thank you very much.

End/Thursday, November 14, 2002

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