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These past 12 months have been of tremendous and historical significance for Hong
Kong and its 6.5 million residents.
On July 1, 1997, the world watched as we proudly entered a new era as a Special Administrative
Region of the People's Republic of China. We Hong Kong people are, at last, masters
of our own destiny.
This past year has thrown up many challenges-indeed many more than we had expected,
or saw coming. Chief amongst the unexpected was the financial crisis in Asia which
sent reverberations around the globe and affected our economic growth in the short
to medium term. Nonetheless, I am confident Hong Kong has the strengths to ride out
the storm with our established institutions of free market, rule of law, prudent
fiscal management and robust regulatory systems.
Hong Kong has experienced years of high property prices, high inflation and high
wage increases which if not corrected will affect our long-term economic vitality.
The Asian financial turmoil has accelerated the pace of the correction. The correction
will be painful but necessary if we are to remain competitive. However, there is
an up-side to this challenge-the downward adjustments to asset prices have led to
a drop in housing and office rentals, which will ultimately help improve our competitive
edge. Indeed, despite the turmoil around us, our strong financial reserves have enabled
us to press ahead with our massive plan of investment in infrastructure, housing
and education as originally planned.
As an SAR, we have taken some significant steps forward-our first Legislative Council
elections were held in May; our first Budget was delivered in February, with tax
cuts for 99% of tax payers and incentives for individuals and businesses; the first
cases were heard by our ultimate appellate court, the Court of Final Appeal; initiatives
were introduced to boost home ownership; infrastructure developments are forging
ahead.
Throughout all of these challenges-and in particular the regional financial crisis-the
Central People's Government has been very supportive. At the same time, our national
leaders have stressed that under the commitments of "One country, Two Systems"
and "Hong Kong people running Hong Kong" with a "high degree of autonomy",
it is up to us to make our own decisions and to chart our own course. This is what
was promised in our constitutional document, the Basic Law. This is what we expected
would happen, and this is what is happening every day in the Hong Kong SAR.
While we in Hong Kong are moving forward with confidence, we are also mindful of
the difficulties, and opportunities as well, which lie ahead. Our community is working
whole-heartedly together to turn our vision into reality and make our city an even
better place as the new century unfolds.
I hope this report will give you a deeper understanding of the key issues we have
faced over these past 12 months. In particular, I am sure it will demonstrate our
commitment to the successful implementation of the "One Country, Two Systems"
concept and to those qualities which have made us one of the world's most exciting
cities and a leading financial, transport, communications and trading centre.
Tung Chee Hwa
