Following is the press conference given by the Chief Executive, Mr Tung Chee Hwa, in Tokyo today :

Moderator: Ladies and gentlemen, thank you very much for coming in such great numbers. We are privileged to have the most famous Chinese in the world, our noble Tung Chee Hwa, the Chief Executive of the Hong Kong Special Administrative Region. Mr Tung is so far, I believe, is one of the most successful Chinese leaders in the world. In his visit to the United States as well as the Asian countries, all the headlines of the newspaper reports have mentioned were successful. Now, as to whether he can continue and maintain with such an assessment from now onwards or not, I believe rests with what will be the consequence of this press conference today so one hour later, whether your headlines will be 'Success' or 'Failure' I believe will decide the fate and that will depend upon how Mr Tung will answer to your questions and how we will be asking the questions. I would like to ask Mr Tung to speak for about 10 minutes at the outset and then move on to questions and answers.

CE: Thank you very much. Good afternoon. I am very honoured and privileged to be here speaking to you. In my former life in business, I used to come to Japan, particularly to Tokyo, four times, five times, six times every year. But since my venture into politics in September last year, I haven't been back to Tokyo, to Japan at all. I am therefore particularly delighted to be back in Tokyo to be meeting old friends, to see some familiar faces but at the same time making some new friends.

It has been 108 days since July 1. In Hong Kong, we are moving forward very well. All three branches of our political structure, the judiciary, the legislative and the executive are all functioning well, functioning normally. The colony continues to expand and the lifestyle to which we are accustomed to continues to go forward. You may be interested to know between July 1 and September 30, there has been more than 160 demonstrations of all kinds in the streets of Hong Kong. We are indeed moving forward with a great deal of pride, a great deal of confidence. Pride because Hong Kong at last is reunited with China and confidence because we know Hong Kong will be better in the future.

Indeed, the latest survey carried out by the Hong Kong University points to an 85 per cent level of confidence of the people of Hong Kong and you may wonder why are you so confident? Well, the fact is that Hong Kong life goes on as usual and the fact is that our future is very much enshrined by the Basic Law which is really our constitution for moving forward and the Basic Law institutionalises that our social, economic and political system which exist in Hong Kong will be different from mainland China, that our lifestyle, our freedom is guaranteed and that we have separate management of monetary system, separate currency. We also have separate and independent judiciary from mainland China. So in fact, apart from defence and foreign affairs, all matters are being managed in Hong Kong by ourselves. The Basic Law provides this framework for us to move forward. The Basic Law also provides a 10 year period for the democratic evolution of our political institution. At the end of that 10 year period, we shall be able to decide for ourselves how do we move ahead with universal suffrage being the ultimate objective. So it is a very important document for us. It is a document that was finalised after four years of discussion between Hong Kong people and people from mainland China. It guides us into the future and the reason of our confidence is in our belief that the Basic Law will be fully implemented, totally implemented.

When July 1 come, several months ago, Hong Kong began to enter into a new era, a very promising, exciting era. I hope when Hong Kong enters into the 21st century, we will see a Hong Kong which is open, fair, democratic, compassionate, a Hong Kong which is very proud of our Chinese heritage, a Hong Kong which continues to be a very important international business centre, a Hong Kong which is a place of education excellence, a Hong Kong which all of us who live in Hong Kong will be very proud of.

As we enter into this new era, I hope very much as there are many new business opportunities, I hope very much that we can draw on the very good foundation that Hong Kong and Japan has always had to build up a new economic partnership which will bring success and benefit to both Hong Kong and Japan.

Moderator: Thank you very much, Mr Tung. Now, I would like to open the floor for questions and answers. We have amongst us, the press are represented here today, the press from both Hong Kong, as well as mainland China as well. I would have no intention to discriminate any of you, but since we have only English to Japanese interpreter available, perhaps because the subject of the press conference, the secretariat was rather constrained and was not able to provide the Chinese interpreter, so please ask your question either in Japanese or English. If you ask your question in Chinese, Mr Tung still would have to translate his answer into English later on so please use either English or Japanese. And those of you who have questions, please raise your hand and with my prerogative I would like to designate you. And when you ask questions, please come up to the microphone and state your name and ..., please.

Reporter: I would like to ask my question in Japanese then. Mr Tung, as the first Chief Executive of the Hong Kong SAR, you have visited Japan this time and have seen energetically a meeting with prime minister Hashimoto as well as the ministers in charge of the economy as well as leaders of the business community and also the tourism industry. So my first question is, have you achieved the purpose of your visit to Japan this time? How would you assess yourself? And my second question is, what would be the ... view for the prospect of the Hong Kong/Japan relationship from now onwards?

CE: I am here for one and a half days. I have had very useful exchange of views with Mr Hashimoto, with other government leaders and business leaders. Exchange of views, understanding of what is happening in Hong Kong is very important, I think, as to whether I have achieved the objective of persuading more investment into Hong Kong, more tourists to visit Hong Kong, I think it's too early to tell. I can only say that we are here to explain what has transpired since July 1. And I must say the response I have received has been very encouraging, the warmth of friendship with which I have been received in Japan has been very touching for me personally and for my colleagues. With Mr Hashimoto we discussed about Hong Kong and he congratulated us on how successful we have been with the transition, implementation of one country, two systems. And also the confidence as we move forward. I have certainly emphasised to him and all the other friends I meet in Japan my own personal confidence that things in Hong Kong will move very, very well. I also emphasised the hope that there will be a new strategic economic partnership with Japan as we move forward. With Mr Hashimoto we also talked about the importance of free trade, therefore the importance of WTO, the need for China to join WTO as soon as possible. So it's been a very useful visit for me and as to the result, I think it will take probably some time to find out but we will keep on trying.

Reporter: Recently the Hong Kong economy has been boosted by the development of mainly the services industry, the financial industry as well as the real estate, the property industry. On the other hand, the manufacturing industry seems to be declining and declining. Now, Chief Executive, on being appointed to be the Chief Executive in your own speech, in your address, you have emphasised that the government will provide support for the high technology oriented and other manufacturing industry. But whereas I understand that within the Special Administrative Region Government there are still strong voices against giving any support to one particular or particular numbers of industry so how are you going to respond to this, Mr Tung?

CE: Firstly let me say that Hong Kong's manufacturing industry has not really declined. In fact, at the peak in Hong Kong we employ 900,000 manufacturing workers but today we employ close to 5 million workers except they are now across the border in southern China. So actually our manufacturing has expanded. It is a very good thing in Hong Kong, it provides tremendous economic vitality to Hong Kong itself. What we are saying to ourselves is that as we look into the future, as we look into the future, the traditional industry in Hong Kong which has very high labour content must continue to move up north and that, that is also true for the service sector, for instance, accounting work, computer input, input into computers being so labour extensive may all have to move away from Hong Kong. Hong Kong already has a very high standard of living and we are not willing to compete at a low end of the labour market. So what we are saying in Hong Kong is that given this environment, given the fact that we are not going to compete with our neighbouring cities, how do we move forward? And we are saying we should move forward in a value added basis, both in the service and industrial sector and this is the way we are going to move forward in the new era. Government will continue as we have done in the past to provide some research assistance, some funds to encourage research and development. But we will leave the bulk of the effort to the private sector, we will continue to do this. The government has been spending money to encourage research and we will continue to do that in the future. I have emphasised the need for moving into high value added, for moving into technology industry and for moving into information technology and these are the areas which will set us apart from other cities in Asia. I have suggested that it's an excellent opportunity as we move into these areas for Japanese companies to get more involved in Hong Kong because you have always been very successful in these areas and your expertise and your knowledge would be a great help to Hong Kong and also great opportunity for you. Thank you.

Reporter: I have two questions. The first is the impact of the Asian currency has collapsed may have some influence on the Hong Kong markets from now onwards so that is what we are worried about right now. So I would like to ask Mr Tung as to what is your prospect and outlook for the future of the currency. And my second question is, Mr Tung, you have mentioned that you would like to see more Japanese tourists visit Hong Kong. However, there has been reports that some Hong Kong hotels have been charging Japanese tourists a premium price or higher price but if you would like to have more Japanese visitors come to Hong Kong, perhaps you need to provide or create more comfortable atmosphere for those Japanese tourists. How are you going to do this?

CE: Well, perhaps I'll answer the second question first. This is a very serious allegation. It was brought to my attention six days ago and we have looked into it very carefully because Japan is a very important country for us and we do not want to have any discrimination of this type. I want to assure you, having looked into it, that there is no such discretionary arrangement against the Japanese. It is not the case at all. Of course, individual and package tours will come on different hotel rates, seasonal fluctuation will have different rates. But no special rates, higher rates, for Japanese tourists at all. In a free market in Hong Kong, all the hotels quote whatever rate they want to quote so if it is in areas of very peak seasons, of course the rates will be higher but it will apply to every nationality. And I do not want to exclude, I have to say, I do not want to exclude there might be individual cases of malpractice here, it might have happened against the Japanese but it could happen against other nationalities also.

The other thing I want to say is that I have many friends here in Japan. Japanese people are very polite and sometimes hotel operators quote a price to you, you don't bargain, if they quote the same price to a Chinese, he might bargain for a lower price. This also could happen but I want to assure you there is no discrimination against Japanese tourists at all. I am very happy that this afternoon I met leaders in the Japanese tourist industry. They have also confirmed for themselves there is no such practice here in Hong Kong. Japanese tourists are very important to Hong Kong and Hong Kong is still a very attractive destination so I hope more and more of you will come and visit us.

Reporter: On that point, both Japanese newspapers as well as television news have presented the evidence to show that higher rate charge.

CE: Well, I have not seen that although the first time the question was raised in Hong Kong it was raised by your newspaper reporter. But today I met the leaders of tourist industry in Japan and they themselves confirmed to me there is no such fixed practices by Hong Kong hotel industry against Japanese tourists and this confirmation comes from your own tourist people. As I say, individual cases there might be but we certainly would take these things very seriously because we would like you to continue to come to Hong Kong.

We have very transparent management of our financial sector. We make sure that regulations imposed on banks to assure their capital adequacy and the management of the financial institutions are strong and we are very satisfied we are doing very well in these respects.

The World Bank IMF meeting was held in September in Hong Kong, the annual meeting, and the foreign finance ministers, central bankers, leading international financial figures were all in Hong Kong for the gathering. I think they came away very impressed with what we are doing in Hong Kong in the area of financial management.

In regards to the second part of my answer, depreciation of South East Asia currency will obviously have an effect on Hong Kong. There is a cut back of tourists from Japan at the same time because of depreciation of South East Asia currencies. They also cut back on tourists from South East Asia obviously that gave us a double blow. That exports or re-exports from Hong Kong to these countries may be cut back because of devaluation so there will be some impact on our economy but we believe it will not be too serious because 83 per cent of our GDP is now in the service sector.

Reporter: If I may once again rehash the hotel high charge problem once again. Chief Executive, you mentioned in your answer that you found no case as such existing in Hong Kong but this morning the chairman of the Hong Kong Hotel Association has been interviewed and he has replied when we asked the question that there may be one company, one hotel which is not an approved or registered hotel who may have been engaged in such a practice. But when we pressed once again with a similar question, he went on to say that it may not be just one hotel, there may be other hotels engaged in similar practices and he would like to check into it. Chief Executive, you seem to be rather satisfied with the answer given from the Hong Kong hotel industry but when you go back to Hong Kong, will the government be once again looking into this, make a re-investigation into this matter?

CE: I come to Tokyo hoping to strike a new economic partnership. I end up being a salesman for our hotels. As I said, the allegation first brought up by Mainichi Shimbun, we took it very seriously already. We will continue to monitor the situation very carefully to make sure that it doesn't happen. I want to assure you that you have all the friends in Hong Kong, we'd like you to come and visit us.

Moderator: Well, it's already time but I don't want to end the question just by the hotel questions. No political questions, question of democracy hasn't been mentioned yet so perhaps we can accept further questions.

Reporter: Thank you very much for giving me this opportunity. Now, I would like to ask one fundamental question. There are many points about the one country two systems we cannot understand very well. When we see these things from the standpoint of power politics, on one hand you have Marxist Leninism type of government being maintained and under that government you are supposed to have two different systems, one is the planned economy and the political systems as under the Marxist Leninism. On the other hand, you are supposed to have the Marxist economy for the market mechanism oriented economy, a free market. But for these two systems to co-exist doesn't make real sense. It is not that logical. Now, last year when I visited Taiwan and met with the president Lee Teng-hui, I was told that many people in Taiwan fear that in two decades time perhaps they may be devoured by communism. Now, for one country two systems with the communist or the Marxist Leninism principle on one hand and the market principles on the other hand, do you really think yourself, Chief Executive, that this will last and co-exist for 50 years?

CE: I think, as I said earlier on, that we have a Basic Law which is our framework for our constitution to go forward. The Basic Law prescribes the different system for Hong Kong, economic, social and political and that it can exist. It does exist today and I am very confident it will exist in the future. The reason why I am so confident is this: that in the first place, the one country two systems concept is a very ingenious way of solving a problem which was created 156 years ago and that on the one hand there is a need for China to resume the exercise of sovereignty. On the other hand, there is a need for Hong Kong to continue to prosper under the existing system. What is happening today is the living proof of the fact that this will work. Now, you may think, well, it's only 100 days. What about in another year, two years, three years, five years? I have every confidence it will work because you have to remember the one country two systems concept is not a concept developed by London, nor a concept developed by Hong Kong. It's a concept originated from China. And it is in the fundamental national interests of China if Hong Kong succeeds we can contribute to China's continuing modernisation, continued reform and if one country two systems succeeds, it means that different social, political, economic systems can exist within one country and I think this will have far-reaching implications to make the ultimate reunification of the country possible. Now, of course, there will be sceptics out there who say it's not going to work, it's not going to work. And then you can't avoid that. But I am quite confident 100 days from now, 1,000 days from now, 2,000 days from now, one country two systems will be thriving because it is in the fundamental interests of China as a whole nation to make it succeed.

Reporter: Perhaps I may be touching upon a rather emotional aspect in terms of economic matters. Now, the Japanese total exports to HK last year stood at 2.7 trillion yen, about 6.2 or 6.3 per cent of the Japanese total exports. Number one, the export market for Japan has always been the United States, around 30 per cent, even though the economic situation may have fluctuated. Now, the second group of countries of our export destination have been countries like Hong Kong or South Korea or Taiwan in the six per cent or a little over six per cent level. So Hong Kong is a very important customer for Japan. On the other hand, Japan only imports about one-tenth of the amount from Hong Kong. So have you at the time when you met with the Japanese political or the business leaders made any special appeal to them to correct this imbalance? This is my first question. My second question is I believe everyone in Japan has given you a very warm welcome but did you find, to be very frank with us, did you find any scepticism or perhaps any doubts amongst the Japanese as to what may be the future of Hong Kong in five years time or 10 years time or didn't you feel any concern amongst some of them because when the president of Peru was here for the first time to give an interview to us he had replied to our question that the reception by the Japanese leaders were neither cold nor warm. That was quite an impressive comment so please give us your very frank and straightforward view.

CE: Insofar as the first point is concerned, I think obviously we would like to export more into Japan but we are a believer of a free market and that as long as our goods are good, as long as other markets remain open, we compete equally. If we win, we win; if we lose, we lose and the strength of our economy is our total belief in the free market system so obviously we'd like to do more in Japan and we'll try to do more in Japan but we do it only on the basis we are good, we are quite relaxed.

Insofar as the second point is concerned, during the course of the last one and a half days I have met many, many people. Honestly and frankly speaking, they are all quite optimistic about Hong Kong's future many because they know Hong Kong well, they know China well, they know what is happening. Others look at it from a macro point of view and see why it needs to succeed. Frankly I was expecting a lot of difficult questions here about the politics. Now, it's already towards the end and I have not received any questions so thank you very much.

I am sorry I have to leave. I wish I can take more questions but I am going to the airport and I don't want to miss my flight. Thank you very much.

Reporter: Now, one political question. In May next year there will be an election of the legislature and you are asking for the candidacy from the democratic party as well. Will you be making any more hurdles or screening for any additional conditions for the democrats?

CE: Well, the election of May next year or any future elections will be held in a very open, fair manner for everybody and I believe all the political parties and many individuals who want to serve the community will participate in this election and we know the election will be fair, will be open.

Moderator: This is a token of our appreciation. But before that, please promise us that when you come to Japan again, you have to come to this press club as well once again.

CE: Yes, thank you very much.