German political and business leaders have expressed a tremendous interest in the future prospects of Hong Kong and China, the Chief Executive Mr Tung Chee Hwa said after his first day of meetings in the federal capital Bonn today (Monday, Bonn time).

During a full day's programme - which included calls on the German Chancellor Helmut Kohl, meetings with several key political leaders and talks with influential think-tanks - Mr Tung said he was heartened by the importance the Germans had placed on maintaining and developing links with Hong Kong and China.

The impact on Hong Kong of the current financial turmoil in Asia, Hong Kong's linked exchange rate system, the economic development of Hong Kong and China and the relationship between Hong Kong and the Central People's Government were discussed.

During all of his meetings, Mr Tung stressed the underlying differences between Hong Kong and other Asian countries badly hit by the financial turmoil. The Hong Kong 'advantages', he said, included an unswerving commitment to free and open trade, well-regulated financial markets and the rule of law.

He said that while the financial turmoil had forced other countries to cut back on infrastructure and social programmes, Hong Kong's excellent finances - with fiscal reserves of more than HK$450 billion - were allowing it to push ahead with massive investments.

"We are not derailed from our path in realising our long-term vision for a competitive and inducing environment for sustainable development, as laid down in the Policy Address last October," he said.

He pointed out that Hong Kong would spend some HK$235 billion over the next four and a half years on such areas as housing, education, transport and information technology.

"We not only have the determination and the will to move ahead, we also have the ability to do so," Mr Tung said.

Mr Tung told his hosts that far from withdrawing from Hong Kong - and Asia - German companies should now be looking for investment opportunities in the region.

He said that the fundamentals which made the region tick were still there, including a hard-working labour force, high savings rates and free trade regimes which facilitated the transfer of technology.

He was especially encouraged to hear during his meetings with German political leaders that Hong Kong's recent asset price adjustments had brought prices to a more reasonable level and this stabilised confidence within the German business community in the future of the SAR.

"These were necessary adjustments. The property market and the stock market overheated and were hurting our competitiveness," said Mr Tung.

"There will be some short-term pain but it will be better for Hong Kong in the long-term and I think those to whom I spoke with in Germany could understand and appreciate this point.

"I asked them not to lose confidence in Hong Kong, not to lose confidence in Asia, and I told them I was confident that there was plenty of opportunities in Hong Kong and China and the region as a whole once the turmoil was over."

The Chief Executive said he had an 'engaging and interesting' discussion with Chancellor Kohl about 'how the 21st Century world would be'.

Mr Tung said he told Mr Kohl that Hong Kong's linked exchange rate and currency board system would stay and that he hoped there were ways to further strengthen the commercial relationship between Hong Kong and Germany.

He said Mr Kohl had promised to look at the issue of visa-free access for HKSAR passport holders to Germany and other Schengen States.

A spokesman for Mr Kohl's office said the Federal Chancellor was satisfied with the smooth transfer of sovereignty to China and emphasised that as part of China, Hong Kong remained an important partner for Germany.

The spokesman said Mr Kohl was optimistic that Hong Kong, thanks to its healthy economic structure and well-regulated financial market, would be able to successfully cope with the consequences of the current situation in some countries in the Asian region.

During the day Mr Tung also met the President of the Federal Parliament (Bundestag) Professor Dr Rita Sussmuth and the Christian Social Union chairman and Federal Minister of Finance Dr Theodor Waigel.

The Chief Executive attended a lunch hosted by the German State Minister for Foreign Affairs, Mr Helmut Shafer, met Secretary of State of Federal Ministry for Economics Dr Lorenz Schomerus and attended a dinner jointly hosted by the Asia-Pacific Committee Association, the Federation of German Industry, Association of German Chambers of Industry and Commerce and the East Asia Association.

He also had useful and broad ranging discussions with two influential think-tanks - the Konrad Adenauer Foundation and the Friedrich-Ebert Foundation - both of which expressed a wish to strengthen their research on, and contacts in, Hong Kong.

Later today, Mr Tung will meet Federal Vice-Chancellor and Minister of Foreign Affairs Klaus Kinkel as well as Free Democratic Party chairman Dr Wolfgang Gerhard before leaving by helicopter for Frankfurt.

In Frankfurt, the German financial hub and home to Europe's second largest stock exchange, Mr Tung will deliver the keynote address at a luncheon organised by the Hong Kong Trade Development Council (HKTDC) and meet European Monetary Institute president Dr Willem Duisenberg.

Early tomorrow (Wednesday, HK time) he will meet Frankfurt Stock Exchange chief executive officer Dr Werner Seifert and attend a dinner with Germany's leading bankers.