Overview Hong Kong has enjoyed a high degree of autonomy since reunification under the concept of One Country, Two Systems'. The Central Government has given maximum support and has not interfered in the running of Hong Kong over the past two years. Economic problems resulting from the Asian financial turmoil - rather than political matters - have been the major challenges facing the Hong Kong Special Administrative Region Government (HKSARG). The economy continued to be hit by fallout from the Asian financial crisis. GDP contracted by 5.1% in 1998 - the first full-year contraction since records started in 1961. Unemployment hit an all-time high of 6.3% by the end of April 1999. The Composite Consumer Price Index dropped by 3.8% year-on-year in April 1999, the sixth consecutive month of CPI falls and the biggest drop on record. On the corporate front, some companies and banks reported losses or big drops in profits. Some retail chains, shops and restaurants had to cut wages or lay-off staff due to slack consumer demand. Nonetheless, more recently, there were signs that the worst was over and that the economy would grow slightly - by about 0.5% - in 1999. The stock market became more active and the property market had stabilised. A liquidity crunch caused by the financial crisis created conditions for a massive and concerted speculative attack against the Hong Kong Dollar and the stock and futures markets in August 1998. This prompted a defensive operation into the stock and money markets by the HKSARG, which spent HK$118 billion (US$15.1 billion) on stock and futures purchases during the month. The actions prevented a meltdown of the economy and saved Hong Kong's linked exchange rate to the US Dollar under the currency board system from collapsing. The financial crisis has also hastened reform of the securities and futures markets and led to closer scrutiny of risk management in the banking sector. The government's prosecution policy, as well as court rulings on constitutional matters relating to interpretation of Basic Law provisions on right of abode and cross-boundary jurisdiction were also the focus of considerable public debate. Following the Court of Final Appeal ruling on the right of abode on January 29, 1999, a government survey found that up to 1.67 million Mainland children and grandchildren of Hong Kong permanent residents would be eligible for permanent residency in the HKSAR within the next decade. The serious social and financial impact of such an influx, and the fact the matter could not be resolved by Hong Kong alone, prompted the government - with widespread community support and a clear majority of the legislature - to ask the Standing Committee of the National People's Congress to interpret Basic Law provisions on right of abode. The HKSAR is operating under a new and unique constitutional order that will naturally be challenged and tested in our own courts under the common law system. Indeed, such challenges are necessary if Hong Kong is to set its own precedents. Distinguished judges from foreign common law jurisdictions continued to sit on cases heard by the Court of Final Appeal, further enhancing and strengthening Hong Kong's reputation for judicial independence. Hong Kong's media has operated freely and unfettered, generating a robust and critical exchange of views on important matters and government policies or actions. If anything, the media has become more critical and demanding in its role as the 'guardians of public concern'. Demonstrations and protest marches continue to be held regularly and peacefully, underlying the importance of free speech and open debate in a community which is open and pluralistic. An average of almost four protests or marches a day have been held since reunification. The new Hong Kong International Airport was officially opened on July 2, 1998, by President Jiang Zemin, who was in Hong Kong with Vice Premier Qian Qichen for celebrations to mark the first anniversary of the HKSAR. Following the opening to air traffic on July 6, 1998, the new airport was initially plagued by technical problems which disrupted passenger and baggage handling services for several days. Problems with the automated cargo handling system at HACTL forced air cargo to be processed at the old airport site at Kai Tak until the end of August. However, the new airport quickly established its credentials as one of the world's most modern and efficient, winning accolades from engineers and the travel industry. During the peak Easter and Lunar New Year holiday periods the airport handled up to 560 flights and 117 000 passengers a day. Hong Kong hosted a string of high-level visitors during the year including US President Bill Clinton, British Prime Minister Tony Blair, French Prime Minister Lionel Jospin, EU President Jacques Santer, South Korean Pesident Kim Dae Jung, Israel President Ezer Weizman, Irish Prime Minister Bertie Ahern, Queen Beatrix of The Netherlands and President Joseph Estrada of the Philippines. The Chief Executive Tung Chee Hwa, Chief Secretary for Administration Anson Chan and the Financial Secretary Donald Tsang kept Hong Kong in the international spotlight during overseas visits which included Canada, the United States, Mexico, Germany, The Netherlands, the UK, Italy, Denmark, Norway, Sweden, Finland, Israel, Turkey, the Middle East, as well as the annual meetings of APEC leaders (Kuala Lumpur), the World Economic Forum (Davos) and the World Bank/IMF (Washington). The HKSARG opened a liaison office in Beijing in March 1999 to facilitate contacts between the HKSARG and the Central Government. The Chief Executive, Chief Secretary for Administration, Financial Secretary, Secretary for Justice and Secretary for Security all visited Beijing during the year to enhance communication and understanding of HKSARG policies. The Chief Executive, in his second policy address, announced plans to broaden the economic base and promote Hong Kong as a centre for innovation and technology in East Asia. Among his other initiatives were establishing Hong Kong as an Internet and satellite broadcasting hub, a major upgrading of transport infrastructure, the development and marketing of traditional Chinese medicine, an overhaul of district and municipal administration and a more streamlined approach to food safety and environmental hygiene. The Chief Executive announced on March 23, 1999, that Mrs Anson Chan would stay in her position as Chief Secretary for Administration for 2H years after she reached the usual retirement age of 60 in January 2000. The news was greeted with enthusiasm by the community and civil service for helping maintain stability during times of rapid change. The government announced proposals to reform the civil service management system to allow greater flexibility in appointment, to provide more competitive and performance-based remuneration packages and to enhance the service-oriented management culture. Hong Kong's 1998 year-end population was estimated to be 6 805 600 - up 188 500, or 2.8%, over the previous 12 months.. Last updated: June 1999