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Following is the full text of the 2009-10 Policy Address - Breaking New Ground Together - by the Chief Executive, Mr Donald Tsang, in the Legislative Council today (October 14):
Mr President,
A. Introduction
1. Just before I delivered my Policy Address last year, the credit crisis in the United States (US) had broken out and created the financial tsunami that swept the entire world. For the people of Hong Kong, this past year has been extraordinary.
Economic Crisis
2. I noted in my previous Policy Address that Hong Kong people should stand united to vigorously pursue economic development and seize opportunities while coping with the crisis. Now, a year later, I can say that Hong Kong people have done a great job in keeping the ship afloat during this economic storm of the century.
3. Hong Kong was hit hard by the financial tsunami -- our economy recorded a sharp year-on-year decline of 7.8% in the first quarter of this year. The pace of deterioration and the depth of the decline in external trade earlier this year were unprecedented in decades. As the economic downturn in the US began to slow, the Asian economies started to improve. In particular, the Mainland economy quickly regained its growth momentum in the second quarter after forceful stimulus measures by the Mainland authorities. Hong Kong's economy also benefited. Our economy grew by 3.3% in the second quarter as compared with the first quarter, reversing the contraction over the preceding four quarters. I am confident that, for the rest of the year, our economy will improve further and gradually recover.
4. Faced with the worst global recession in decades, the Government spared no effort in "stabilising the financial system, supporting enterprises and preserving employment" in the shortest possible time. The Hong Kong Monetary Authority introduced a full deposit protection scheme. As a result, interbank rates fell significantly. The loan guarantee schemes launched by the Government last year stabilised over 10 000 enterprises and secured more than 240 000 jobs. The Government's relief measures since last year have amounted to $87.6 billion -- equivalent to 5.2% of our Gross Domestic Product (GDP), higher than the average for the G-20 economies. The stimulus packages taken together, which would raise this year's GDP by roughly two percentage points, have abated the rise in unemployment. These measures have stabilised the local economy without impairing the Government's fiscal position in the long term. The Mainland and Asian economies have been improving at a pace faster than those in Europe and the US. Hong Kong as an Asian business hub has attracted an influx of foreign capital, boosting our real estate and securities markets.
Real Estate Market
5. The local real estate market has not been as seriously affected in the past year as in the 1997 financial turmoil. After a brief downward adjustment, property prices have returned to their mid-2008 levels. Except for luxury flats, property prices are still below their peak in 1997. The home-purchasing power of the public is greater than in 1997, and the number of negative equity cases remains very small. A steady property market can prevent property owners from being hit doubly hard during an economic downturn. The relatively small number of residential units completed and the record prices attained in certain transactions this year have caused concern about the supply of flats, difficulty in purchasing a home, and the possibility of a property bubble. The Government will closely monitor market changes in the coming months. When necessary, we will fine-tune the land supply arrangements and discuss with the Urban Renewal Authority and MTR Corporation Limited with a view to quickening the pace of bringing readily available residential sites to the market.
Role of the Government
6. The global economic crisis has dealt a great blow to most governments and communities. We have to revisit the Government's role in promoting economic development. The Task Force on Economic Challenges (TFEC) set up last year recommended the development of six industries where Hong Kong enjoys clear advantages. They are: education services, medical services, testing and certification, environmental industries, innovation and technology, and cultural and creative industries. The Government has accepted the TFEC recommendations and is developing specific measures for promoting the six industries. Our strategy is to remove barriers to these industries and help them tap into new markets. We will adhere to the principle of "Big Market, Small Government".
New Challenges
7. The economic crisis has changed the landscape of the global economy. The Mainland has been less affected than others, and has emerged as a prominent economic power. While Hong Kong is relatively stable, our competitive environment has changed. Our first new challenge is to maintain Hong Kong's status as a global financial centre. To complement the stated policy of gradually internationalising the Renminbi (RMB), the Mainland needs multi-level international financial services. As the RMB moves towards internationalisation, the Mainland needs a highly open global financial centre that is fully aligned with the world financial markets to serve as its platform for foreign financial activities. Hong Kong can fit this role by making the best of our advantages. We can support the Mainland in promoting the regionalisation and internationalisation of the RMB. In the process, Hong Kong can help the Mainland enhance financial security and develop offshore RMB business. Recently, the people of Hong Kong have expressed concern about the financial development of Shanghai and the policy of the Central Authorities on this. Some even feel worried about this development. However, I believe that Hong Kong can work in collaboration with Shanghai and leverage our respective strengths to contribute to the development of financial services in the Mainland. The competition between Hong Kong and Shanghai is not a zero-sum game.
8. Another new challenge stems from the significant breakthrough in cross-Strait relations over the past year. Hong Kong has been acting as a bridge between the Mainland and Taiwan in the trade and economic spheres. This intermediary role has been an integral part of Hong Kong's economic pillars, including trade, financial services and logistics. However, the opening of the "three links" this year has put pressure on this traditional role. In particular, there has been a drastic decrease in transit passengers and cargo transshipment. As cross-Strait economic and trade relations deepen, this part of our economy may face greater challenges. It is imperative for us to formulate an overall response strategy, which I will cover later.
(To be continued)
Ends/Wednesday, October 14, 2009
Issued at HKT 11:16
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