Following is the transcript of the press conference given by the Chief Executive, Mr Tung Chee Hwa, before the opening dinner of the East Asia Economic Summit, World Economic Forum, at the Hong Kong Convention and Exhibition Centre this evening:

CE: Thank you very much. Good evening, ladies and gentlemen. I am happy to be here. On behalf of Hong Kong, I would particularly like to welcome this gathering. We are very proud to be hosting this gathering, the East Asia Economic Summit, being organised by the World Economic Forum, so we are very happy to play host to this event and I am looking forward to attending the dinner tonight and I will be happy to answer any questions you might have.

Question: Next week you are going to be going to London and I understand one of the issues you will be raising will be the question of the Vietnamese Boat People. Could you elaborate on this and what do you hope to achieve in this area?

CE: I think the Vietnamese Boat People issue has been with Hong Kong for close to a quarter of a century and we in Hong Kong, as citizens of the world, have certainly contributed a great deal to the solution of this problem. It is time to bring this issue to a close. And when I am in London I will appeal to the British Government to help out in what every aspects they can help out. And I certainly hope they will help out in different aspects. And I am looking forward to talking about this as one of the many subjects I will be talking about when I am in London.

Question: How... considering that Britain is no longer the sovereign power?

CE: Well, these are efforts we must make whether we succeed or not. Certainly, I feel very strongly that Britain still has a moral obligation to help out on this issue and I very much hope Britain will.

Question: Mr Tung, given that tomorrow's land auction is the first ever ...?

CE: I think let us not predict what the market will do tomorrow. Let us see how it goes on. And I will keep my fingers crossed anyway.

Question: Do you believe the land developers will ...?

CE: I don't want to second-guess any of the developers. Let's keep our fingers crossed for tomorrow's auction.

Question: Could I ask you, please, to repeat your remarks in English.....?

CE: There were two questions, one of the questions was about the Mainland children coming into Hong Kong, and there was a court decision about the children outside wedlock; the court decided that they are also entitled to come to Hong Kong. And the question asked of me is, what we will be doing. And I said that the Government is looking into this matter with a great deal of urgency and we hope to come to a decision as to what is the next step we will take, whether we will appeal or whether we will just take the court's decision.

The other question being asked was about the Taiwan flag. And I was saying that we have to really uphold the one country principle, which is very important to many of us here in Hong Kong. And there was a question as to whether this is against the basic freedom of expression, I guess. And my answer is, no, it is not against freedom of expression. The police intervened in the case of this person who was waving a flag and the grounds for that intervention - a very friendly one - was the concern as to whether it would create some disturbance; people might start arguing about things and so on and so forth. So it was all very nicely handled.

Question: I have a couple of questions. Number one, do you think that it was justifiable for the police to stop somebody from merely waving a Taiwanese flag ... And my second question is...(allegations of Japanese tourists being overcharged)?

CE: I thought I answered the first question already. So I am not quite sure how to answer it one more time.

Question: But do you think it is justifiable for the police?

CE: I think it is justifiable, on the grounds that --

Question: Does it constitute a threat to Hong Kong?

CE: Well, these are the judgment calls that need to be made and it is important that we, on the one hand protect the rights of people to express their views, on the other hand make sure that the order of the society is maintained.

With regard to the second issue, there are three things there. Firstly, are the hotels here overcharging Japanese tourists? I think this is being looked into by the hotel industry very seriously, by the Tourist Association very seriously. We take these allegations very seriously.

In my former life as a businessman, I know that I pay a premium for the hotel or air-tickets if I travel individually rather than travel in a group, for instance. So it really depends on what you are talking about. But we do take this thing very seriously and we are looking into it.

Secondly, I am going to be in Japan for many, many reasons. It is important to explain to Japan, one of our major trading partners, what is happening here in Hong Kong. I will also go there to talk a little bit about tourism but that is not my main objective of going there.

And thirdly, if I can be helpful and I want to be helpful because tourism is very important to Hong Kong. But please don't expect miracles overnight, these things do take time.

Question: ... first of all, who will you be meeting there? And also, have you been asked by any groups in Hong Kong to bring up matters such as the apology to comfort women, the war reparations, ... the Diaoyu Islands? And ... will you actually do so, will you ...?

CE: Well, on your second part, I have not been approached by anybody on any of these subjects. But I would like to say that on the Diaoyutai issue, as a Chinese I feel strongly that Diaoyutai is part of China. It is, however, a matter which should be left with the Central Government and the Japanese Government to sort out.

Insofar as your first point is concerned, I am there to meet a wide spectrum of the Japanese community - businessmen, the tourist industry, as well as ministers - and the programme is being finalised now and will be made known in greater detail later on.

Question: Sorry, could I just have a follow up. Will you actually raise the question of Diaoyutai while you are there?

CE: That is not the objective of my visit. But if it was raised, I certainly would discuss it.

Question: In your policy address you mentioned ... but I wonder will SAR Government face some discord about the ... infrastructure, both in ... and ... There are a few different opinions about the ... Hong Kong. But you said you ... very clearly in your policy address that you will develop the projects which Hong Kong needs ... And also, my third question, will you ... That's the first one. And the second one is, ... a weekend visit ... and you said they're a part ... But I've heard some people saying that local property tycoons are very reluctant to ... So, ... develop that land if ...? Do you know what I mean? And also, visitors visiting Lok Ma Chau...

CE: I am not sure how I can answer the specific issues you have raised, but I will say generally in this way, that as we plan into the future we have to look at what we can do in Hong Kong to increase our competitiveness by working together across the border with cities in Guangdong Province. Whatever we can do to improve our competitiveness, to improve the quality of life here in Hong Kong, is something that we really need to do, to look at very seriously. So now there are two things we are doing. We are now setting up this Infrastructure Co-ordinating Committee and this is going to meet shortly, in October, to talk about some of these projects we have in mind, like Zhuhai-Hong Kong Lingdingyang Bridge or the bridge linking Hong Kong and Shekou. So these are major projects we are going to talk about, we are going to evaluate, we are going to look at the feasibility studies, before, certainly, we will take a final decision on them because they have to really make short term and long term sense.

And there will be another set of committees which we will set up with Guangdong Province, together with the Central Government, to evaluate a whole series of things between Hong Kong and Guangdong Province - whether in the area of water supply, moving people across the border, moving the trucks across the border more efficiently, or security issues, food supply. Anything that touches the daily life of Hong Kong. And we hope these groups of committees will address some of these issues on a more structured framework, so we can take these issues forward.

So I'm sorry, I can't answer you specifically about Lok Ma Chau and all this, because I don't know enough about it.

Question : It has been slightly more than 100 days now since you have been the sole boss of Hong Kong. What has been the toughest challenge or the most unexpected challenge that you have faced since the handover?

CE: Well, Stephen, I don't feel I've been the sole boss of Hong Kong. I listen to the voices of the people and work together with the Executive Council and the Provisional LegCo, as well as the total support of the government structure, to develop policy and to tackle the problems from day to day. I think everything is very challenging because one country, two systems is new; we are entering into a new era; it demands new thinking, a new way forward. At the same time, preserving many of the things that we have done well before. So I am just glad that I have this opportunity to take on this challenge.

Question: Mr Tung, the day after you policy address, speaking to the General Chamber of Commerce, you said that we have real problem of interest rates now and that will have a negative effect on inflation, which is a good thing. But on companies who have to borrow in Hong Kong dollars or banks which have to borrow in the ... market, or any person who has to borrow ... as opposed to two months ago, ... the high interest rate, and companies ... remain at these levels. Do you think the negative implications on inflation outweigh the ... as a whole and ...?

CE: Well, I wish I could dictate the interest rate. But it is being dictated by the market, and rightly so. Also, I was merely making a point that a positive interest rate, actually in one aspect helps in dampening inflation. Obviously, a persistently high interest rate is no good for the economy. But a long period of negative interest rate certainly is no good for the economy. So as we move forward, we have to really look at these things very carefully. But as I say, our currency is linked with the US Dollar, so the interest rate is not decided by us, as such, any more.

Question: But we are now looking at a massive widening of the ratio between US and Hong Kong interest rates and I wonder if you could give an indication, please, of how long this will last? There certainly seems to be a ... effect Hong Kong's ...?

CE: This is, I hope, a temporary phenomena. It will go on, but I believe it is temporary.

Question: ... saying that eventually, Hong Kong will be replaced by Shanghai or Beijing economically?

CE: Both Shanghai and Beijing are really making a lot of progress and I hope they will continue to make a lot of progress. But in Hong Kong, we will move forward too and you will find elements of my consideration in the policy speech, the direction we are going, and the purpose is to make sure we are staying ahead. And as I said when I was in Singapore, competition is a good thing because it keeps all of us very healthy and we run faster. And no, we are not concerned about this competition.

Question: (on whether CE has decided to run for NPC elections).

CE: I am sorry to disappoint you. I have not come to a decision yet but I will be making a decision very, very shortly.

Question: ...?

CE: In the very near future I will be making a decision.

Question: ...?

CE: I would expect to be. Something like this, but don't hold me to the exact date, but I will be making a decision very quickly, yes.

Question: You mentioned, earlier, the question of cross-border co-operation and security. I would like to ask you, one problem which has been brought to your attention ... is the question of Home Visit Permit... from certain Hong Kong people, ... I would like to ask you whether this is an issue that you will raise, or whether you have raised this issue with either the provincial or the central Chinese authorities ...?

CE: You ask difficult questions. The security issue which I am talking about, really refers to security issues between police on this side of the border, public security on the other side of the border; really about the law enforcement aspect of it. Insofar as your particular question is concerned, obviously this matter has been drawn to my attention, it is something I am looking at at this moment.

Question: What action ... you can take ...?

CE: It is something which I am looking at at this moment. I don't want to say anymore.

Question: I understand you've had a number of meetings this week with foreign leaders and ... of issues were you addressing with those leaders? And secondly, ...?

CE: To answer your second question, I have no plans to meet the North Korean leaders when they are here. Insofar as the first question is concerned, I have met some of the leaders who are attending this gathering and we exchanged views generally about the world, about Asia, and of course about Hong Kong specifically. And I am very proud to say that most of the leaders are very impressed with what is happening in Hong Kong, how well we are doing. Indeed, we are doing well. And we exchanged views about what will happen with the Euro and about the East-Asia financial markets and so on. It has all been very useful and helpful.

Question: ... Australia, will you be raising race issues ...?

CE: I am looking forward to meeting Mr Downer tomorrow and I am going to think through the issues we need to discuss.

Question: As the leader of Hong Kong, in what area do you think you are doing better than ...?

CE: Well, I think I'd rather you be the judge. But I feel that my great emphasis is to look at where Hong Kong is going in the world we live in today, and great emphasis on education, on housing, in looking after the elderly people. The things I feel our community as a whole is very much concerned about and I think someone whose grandparents lived here, whose parents lived here, I am living here, my children are living here, my grandchildren are living here - I feel I know Hong Kong well, I know what we need to do in Hong Kong, and we are all very committed to make it work.

Question: What are the areas you feel you are doing better than?

CE: I will let you be the judge.