**********************************
Following is the transcript of remarks (English portion) by the Chief Executive, Mr Donald Tsang, at a media session after chairing the first meeting of the Task Force on Economic Challenges this afternoon (November 3):
Chief Executive: The Task Force on Economic Challenges made a good start at its first meeting this afternoon. I am grateful for the views and advice expressed by members at the meeting. Needless to say I am also grateful to Mr David Burton, of the IMF, who flew from the United States to give an up-to-date account and detailed analysis of the global tsunami and the financial situation. You will have the opportunity to ask him questions later. The task force had an in-depth discussion on both the global situation and how this may affect Hong Kong¡¦s economy.
The task force has come to the following views:
Following the introduction of a series of rather unprecedented measures by authorities of major developed economies to tackle the financial tsunami, there are signs that stability is gradually returning to the global financial markets. But the huge losses incurred by the financial institutions and the consequential impairment of the capital base, financial markets are experiencing massive de-leveraging in a short span of time. This phenomenon will have a significant impact on the availability of credit to corporate and retail borrowers. The tightening of credit in the financial markets and the damage to corporate and household balance sheets due to falling asset prices will lead to a reduction of investment and consumption. Through trade and investment channels, the adverse impact will be transmitted to Asia and other emerging economies, especially those who rely heavily on exports to the United States, Western Europe and Japan.
Hong Kong¡¦s financial system has demonstrated a high degree of robustness and resilience during the financial tsunami. We will not be immune from the wave of global credit tightening and economic downturn. Being a small and open economy, the risk of Hong Kong going into a recession in 2009 has increased. It is expected that those sectors relating to financial services, trade and logistics, tourism and consumption-related services, real estate and construction will be hit rather harder in the next year or so. The task force has agreed to focus its work on those four sectors, especially the financial services sector which is the anchor of all economic activities.
There are two dimensions in our deliberations. First and foremost is the urgent need to mitigate the extent and impact of the expected tightening of the credit market in Hong Kong, both for the corporate and retail sectors. The Financial Secretary will continue to spearhead government efforts on this front. At the same time, we will focus on the competitiveness and the new opportunities for the four sectors. Our SMEs in particular are facing increasing difficulties in their daily operations because the credit market has tightened and consumption is likely to fall. The Government has announced measures that will provide funding support to the SMEs.
Members believe we must consider further measures to support the SMEs. The task force noted that in past crises, hefty increases in unemployment occurred. The unemployment rate looks set to rise as a result of the downturn, and more visibly in 2009. Members concurred that keeping people gainfully employed in the job market should be a major feature in their consideration. Preserving the confidence of Hong Kong people in our economy and promoting employment are on top in our priorities.
In the coming months the task force will continue to keep watching closely global and local developments and assess their impact on Hong Kong. The task force secretariat will contribute to the work of the relevant bureaus and departments in their engagement with the affected sectors in developing remedial and preventive measures. It will also encourage wider public discussions of these measures and other relevant concerns via its web site.
While the work of the task force continues, the Government is sparing no efforts in identifying and implementing measures in response to new developments in the financial markets without delay. At its next meeting in December the task force will review the global financial situation again and will address the specific proposals the Government and industries may take in response to the challenges at hand and will turn the crisis to the best advantage of Hong Kong. Meanwhile, members will continue to exchange views and crystallize specific ideas through email or group discussions before their next meeting.
Reporter: ¡Khow this is actually going to help the economy¡K
Chief Executive: The important thing to remember, we are dealing with the financial crisis at hand under two tracks. The first track is on daily developments, the eruption of new issues. These are being tackled effectively by existing mechanisms led by the Financial Secretary, together with the Monetary Authority, the Securities and Futures Commission and other financial institutions and you have seen how we have dealt with it in the past. This is very robust, very resilient and very effective. On the other hand, we need a task force of this kind to look at the wider implication of this global development to see whether there are further pitfalls for financial centres such as Hong Kong, and particularly opportunities for Hong Kong. We are not talking about things we may implement immediately. This is not a job of this task force, it is a job what we are doing right now elsewhere. At the same time we are talking about the longer term measures for instance for the SMEs which may not have immediate impact but this will be followed through.
¡]Please also refer to the Chinese portion of the transcript.¡^
Ends/Monday, November 3, 2008
Issued at HKT 21:03
NNNN
Windows Media format
Real Media format