Following is the transcript of the press conference by the Chief Executive, Mr Tung Chee Hwa, held in Washington, USA, on September 10 (US time):

Presenter: Ladies and gentlemen, welcome to the press conference of Mr C H Tung, the Chief Executive of the Special Administrative Region of Hong Kong. He is accompanied by the Secretary for Trade and Industry, Ms Denise Yue, and Hong Kong's Commissioner here in the United States, Mr Kenneth Pang.

Before starting, let me just set out a few ground rules. The Chief Executive will begin by giving a few opening remarks and will take questions in English for about 15 minutes. Thereafter he will take questions in Chinese for the many journalists who have come so far from Hong Kong and been so patient in covering this important visit. When questions are being asked, I'll be grateful if the questioner could identify himself or herself and the organisation he or she represents. Mr C H Tung, the Chief Executive.

Mr Tung: Thank you very much, Chris. I arrived in Washington on Monday afternoon. I've had a very busy two-and-a-half days where I've had the opportunity to meet members of the Administration, most of the leadership in both the Senate and the House, and the business community, as well as a number of the think tanks who are active in Washington. We had very useful and engaging discussions. I think these discussions were very helpful. They were candid, straightforward, friendly, and it helped to deepen the understanding of both sides and I thought they were very, very useful.

I was particularly pleased that most of our friends, most of the people I met in Washington, they appreciate and understand how well the transition has gone and I also went on to explain how confident we are of our future. We discussed, obviously, also, about the elections next year.

I also emphasised the very important relationship that Hong Kong has with the United States - that over 40,000 Americans actually live and work in Hong Kong; many, many American firms use Hong Kong as their base for operations in Asia and into China - and this relationship is very important to us.

I also took the opportunity to explain that Hong Kong's return has been very smooth, that in Hong Kong we are very proud that we are now part of China, and that we are very confident of our future.

We also went on to talk about issues that we are very concerned about. Issues such as law enforcement, enforcement against intellectual property violation, money-laundering. Issues that generally relate to law enforcement were also discussed because these are issues where we in Hong Kong feel very deeply and they are very important here in the United States also.

So, on the whole we had a very useful two-and-a-half days and I am very glad that I did make the trip, although it was a long trip and it is a very tough schedule, but I think we've achieved most of the objectives we set out to do.

I will be back here in Washington on Friday to visit the White House before I return to Hong Kong in the evening. So, I will be very happy to answer any questions you might have.

Question (SCMP): Mr Tung, are you disappointed that members of the Senate and of the Congress, and the media, seem to be unconvinced by your explanation on electoral arrangements? Do you think your purpose in this regard has failed?

Mr Tung: Chris, we had long, candid discussions on the elections for next year. I thought those discussions were very useful because they helped, for my side, to explain to my friends in America what we are doing in Hong Kong about these elections. And the ability to engage each other in these discussions is very important. It has been very, very helpful. But as I explained, at the end of the day, I, myself, and the SAR Government, must do what is in the long term interests of Hong Kong, and it is up to we in Hong Kong to decide what is important and what is necessary. Because at the end of the day, we are the ones who have to live with the consequences of our own decisions. And I am very confident we are going about it the right way. And it was a very good opportunity for me to explain to many of our friends who are in Washington. Some understand what we are doing, others do not quite agree, but that is what it is all about, the ability to communicate, to understand each other as we move forward.

Question: Mr Tung, what was the reasoning why you told them that Hong Kong people are not ready for democratic elections?

Mr Tung: I don't know where you heard this from. Let me tell you what I said. I said that the Basic Law has mapped out the political evolution for Hong Kong over the next 10 years and that there will be an election next year for the first Legislature, there will be an election in the year 2000 for a second Legislature, there will be an election for a third Legislature in the year 2004. And then the Basic Law further goes on to say that beyond that time, depending on the view of the Hong Kong people, the approval of the CE and two-thirds of the Legislature's approval, we can decide how we want to go ahead beyond that period, beyond 2008, and universal suffrage is our ultimate objective.

And I tried to explain to our friends in America. It is not a question just about next year's election, it is about the fact that we have a Basic Law which defines the evolution of our political process very, very clearly. And I have also explained how I was elected by a committee of 400; how in 2002 there will be another election for the next Chief Executive and what will happen in 2007, and the Basic Law is also very clear on that.

So my point is that there is the Basic Law which defines very clearly how do we move forward, and we will do it in accordance with the Basic Law. And from my point of view, this is a good way to do it. It is a gradual step by step approach and I think it suits Hong Kong very well. And I think we'll move forward in the right way and that is the way we are going to go forward. And that the discussion is centred around next year's election, here, but what I am trying to tell everybody is: Hey, you have to look way beyond next year and see what is going to happen 10 years from now, 20 years from now, because we have to look far in the development of our political institutions.

Question: How does it suit Hong Kong very well to disenfranchise a number of voters for the next election?

Mr Tung: Let me try to explain the whole picture. There are about 2.5 million registered voters in Hong Kong and come next year they will all have the right to vote. I hope they will all vote. But they certainly have the right to vote, all approximately 2.5 million voters, so they are not being deprived. The issue is really about the fact that out of the 60 seats of the Legislature, according to our Basic Law 20 of them are directly elected through universal suffrage type of elections, 30 are through functional constituencies and so therefore are indirectly elected, and 10 through election committee and therefore indirectly elected. That is for next year. And what happened, the debate is really, for nine out of those 30 functional constituencies, in 1995 the franchise was very rapidly expanded; it defeated the whole reason why there were functional constituencies in the first place because it was never intended as a universal suffrage type of election. So all I have done is to move it back to what it was intended for in the first place.

But let me try to tell you this. What we do in Hong Kong is very important to us in Hong Kong, and what we do in Hong Kong will have the support of the people. And that is how we are moving forward.

Question (RTHK): Mr Tung, the basic problem seems to be a credibility problem - not with you or with the Hong Kong Government but between United States officials and China. Based on what you have heard here and what people have said to you, during the upcoming visit of President Jiang Zemin, what do you think he could say or do that would give confidence to Sino-US relations, and in turn to the future of Hong Kong?

Mr Tung: Francis, the matters such as elections and so on and so forth, we are moving forward. As you know, the bill is now before the Legislature. It is totally a Hong Kong issue today. Obviously, as a citizen of Hong Kong and therefore of China, I see the US-Sino relationship as something very, very important to Hong Kong, so I very much hope that the President will have a good visit here when he comes. And I believe he will have a good visit and that a good and constructive relationship will really help Hong Kong a lot as we move forward into the twenty-first century.

Question (RTHK): Mr Tung, of course it would. But the question is, what can he say or do?

Question: I am just wondering what is your reaction to the bill which is being put before the Senate by Mr Jesse Helms?

Mr Tung: You know there are all sorts of bills in the pipeline; some have already been passed. I think I understand America's concern about Hong Kong, and Americans have huge economic interests and trading interests there. But the best way for America to help Hong Kong is really to improve America's relationship with China and a good Sino-US relationship is very, very critical to Hong Kong.

And I think it is also important to recognise that Hong Kong does have a separate custom territory and there are law enforcement issues such as drug-trafficking and so on and so forth on which the US actually works together with Hong Kong well, and these are the things which we would be concerned about. The best way for America to really help Hong Kong is to continue to recognise the independent custom territory which the United States obviously does. And the other is, really, to get on with China in a very constructive way, which I hope America is now beginning to do.

Question (follow up): But that doesn't mention ... about democracy. Isn't it really an embarrassment that this is tabled now when you are here?

Mr Tung: You know, it is not embarrassing at all, and the reason why is this: we in Hong Kong care very much about democracy. Democracy is not the monopoly of the United States of America or any western nation. We in Hong Kong, in Asia, care very much about democracy also. But we will go forward in our way, what is right for Hong Kong.

Question: Mr Tung, how much authority do you have to make your own decisions without direction from Beijing?

Mr Tung: On all matters that are associated with defence and foreign policy it is a matter where I and my colleagues in the Government have no authority. On issues that deal with Hong Kong, internal issues about Hong Kong and some issues in foreign trade and so on, we make all the decisions in Hong Kong. And this is what 'one country, two systems' is all about, and this is what we are doing.

Question (HK Standard & Sing Tao Yat Pao): After your meeting with Senators Mack and Lieberman - we saw Senator Lieberman in the hall and he said he thought that this disagreement over the election law would present a bump in the road towards the summit between Presidents Jiang and Clinton. What is your reaction to this and do you think this basic disagreement over the election law will in fact affect that summit and US-China relations?

Mr Tung: I certainly would hope not. But what is important for us all to remember is that I am responsible for the well-being of Hong Kong, I am looking after the long term interests of the people of Hong Kong. And we do that properly: we listen very carefully to the views of Hong Kong people and we take us forward on that basis. And this is very important. Obviously, we hope very much that the Sino-US relationship will continue to improve.

Presenter: As the keeper of Mr Tung's very busy schedule, I had better warned that we are about to change channels, so if you would like to put one more in English.

Question: What is your relationship with Li Ka-shing, the Hong Kong businessman, and what do you intend to do about Hong Kong companies acting in concert with Li Ka-shing selling unregistered securities on the US market, the US ...?

Mr Tung: I am not quite sure what your second question is. Obviously, you don't live in Hong Kong, so I will try to answer the first question. Mr Li is a good friend of mine. He is a good friend of mine. I have lived in Hong Kong for many, many years. I arrived in Hong Kong when I was 10 years old, I went overseas when I was 17, I returned to Hong Kong in 1969, so I have many friends in Hong Kong, in addition to Mr Li, many, many good friends in Hong Kong and they are part of Hong Kong's very important community, making a huge contribution to the success of Hong Kong.

Insofar as your second question is concerned, I am not quite sure what it is, so I am sorry I can't answer you.

Question (ATV): Mr Tung, it has been said that your reputation here is that of being Beijing's man. How successful do you think you were in dispelling that reputation?

Mr Tung: Well, I have said to all my friends here in Washington that I have lived in America for nine-and-a-half years, I understand the United States of America very well. I have many good friends here. I think this is a great country. But I also told all my friends here in Washington that I am Chinese. I am very proud that I am Chinese. I am patriotic. I want China to succeed. I want China to become a great nation again and I have every confidence that China will become a great nation in the twenty-first century. And I have also said that I, myself - we in Hong Kong - to the extent that we can be a bridge, we will want to be the bridge. But I also emphasised my responsibility is to the well-being of Hong Kong and to make Hong Kong very, very successful as we go forward.

Thank you.