The Chief Executive, Mr Tung Chee Hwa, said today that with Hong Kong's inherent strengths and resilience, it can surmount difficulties and rise to challenges so long as Hong Kong people stand united and work together.

Addressing the Provisional Legislative Council, Mr Tung said that the more difficult the situation was, the more united we should be and the Administration hoped to work with the whole community to build a harmonious and cooperative society.

Mr Tung pointed out that during the Asian financial turmoil in the last few months, Hong Kong had also suffered heavy setbacks despite its strong fundamentals and stable monetary system.

"Hong Kong has a sound and well-operated financial monitoring system; ample fiscal reserves as well as prudent financial management policies. The Government has no foreign debts. Private firms take prudent financial measures when seeking foreign loans.

"In spite of these, speculators have stirred up trouble in our stock and futures markets and challenged our determination and ability to maintain the linked exchange rate. Hence, our linked exchange rate system and even the entire financial and economic system are put to severe tests," he said.

Mr Tung stressed that in the face of this financial situation, the Government's most important task at hand was to take firm and resolute measures to safeguard the stability of Hong Kong's economic system. To achieve this, it was vital for us to defend the linked exchange rate, and the Government was determined to do so.

"Our sound economic foundation, huge fiscal reserves and effective financial systems and monitoring mechanism are abundant proof of our capability to maintain the currency linkage. The staggering events in some Asian countries have only made us more determined to maintain the dollar peg," he said.

Mr Tung said that from another perspective, the economic adjustment that came as a result of the financial turmoil had certain positive effects on the economy : the decline of property prices and the slow-down of salary adjustment and inflation would enhance our competitiveness and be conducive to the long-term healthy development of our economy.

"The Asian financial turmoil has placed obstacles in the course of our development. Yet, the foundations on which Hong Kong is firmly based are hardly shaken. All the advantages that we had prior to the financial crisis are still with us. The forecast of the relevant government departments reveals that our economy will continue to grow in 1998 despite the marked economic slow-down in the territory," he added.

He pointed out that we had no reason to lose confidence of ourselves and on no ground should we allow our lofty spirit be dampened by the financial crisis.

"We should remember in particular that upon the smooth return of Hong Kong to China on July 1, 1997, we have become masters of our own home and have successfully implemented the 'one country, two systems' concept. We should rejoice over and take pride in these great achievements.

"The Central People's Government has great confidence in Hong Kong and believes that we are able to administer Hong Kong properly under the principle of 'one country, two systems'. Given the trust of the Central People's Government as well as that of the entire nation, there is no reason for us not to trust ourselves," he said.

Mr Tung said that the Government was well aware of the sufferings and problems encountered by residents in the current financial turmoil.

"We are very much concerned about this. Nevertheless, I firmly believe that with the solid foundation of our economy and the strong and rapid economic development within our country, Hong Kong will be the first to get back on its feet when the Asian financial turmoil is over.

"We have huge fiscal reserves, with which the Government is able to stabilise Hong Kong's economy and maintain the currency linkage while pushing ahead with the massive infrastructural development as firmly stated in the Policy Address.

"In fact, since the outbreak of the financial turmoil, the Government has been actively seeking other possible measures to strengthen the economic vitality, and to weather through the hard times with all the people of Hong Kong," he said.

Mr Tung said that he hoped all residents would, at these difficult times, take a look at the achievements we had made so far and the competitive edge we had in development.

"The problem we are now facing is nothing but to find the way to overcome the temporary difficulties confronting us and keep moving ahead to reach new heights," he said.

The Chief Executive also noted that many people were concerned about the housing problem.

He said : "Real estates are very important to our economy and for many people, they represent the savings of a lifetime. Property prices affect the stability of the banking system to a great extent. The Government is therefore paying close attention to the development of the property market, in particular at this time."