The complementary relationship between China and Hong Kong provides a solid foundation on which "one country, two systems" will work, the Chief Executive, Mr Tung Chee Hwa, said today during his visit to Malaysia.

Hong Kong and the Mainland have the same long-term interest and Chinese leaders have emphasised time and again the importance of maintaining Hong Kong's stability and prosperity so that we can contribute to the modernisation of the whole country, Mr Tung said.

Addressing a luncheon meeting of the Asian Strategy and Leadership in Kuala Lumpur, Mr Tung said, "I firmly believe that if Hong Kong succeeds, China will benefit. If China is prosperous, Hong Kong will benefit even more."

Setting out the reasons for confidence in Hong Kong's future as China's Special Administrative Region, Mr Tung said the first ground for confidence was in China: "In the commitments that China has made to us, in the prospects she holds out for us, and in the determination and capabilities of her leaders to achieve their vision for a better society in the next century."

"It is always well to remember that the concept of 'one country, two systems' was China's idea, not anyone else's," he said.

"This concept was created by men who were mindful of the fundamental interests of China as a nation and of the Chinese as a people."

"China's leaders are completely committed to making 'one country, two systems' work. They trust Hong Kong people to administer Hong Kong; they have pledged their full support for us."

"From my own experience over the last eight months," Mr Tung said, "I can tell you that the Central Government has given us a free hand in dealing with our internal affairs and has given us every encouragement to succeed."

He said that the Basic Law had committed China to giving Hong Kong a high degree of autonomy under the "one country, two systems" concept.

"The Basic Law guarantees that Hong Kong will maintain its existing legal, social and economic systems. It allows us to keep the existing freedoms and life style of our people; it protects the right of private ownership; retains for Hong Kong a separate currency and customs territory; and it reaffirms our long established policies of prudent financial management and low taxation."

"These guarantees are firm and legally binding," Mr Tung said.

The Chief Executive said that China had undergone dramatic changes since it opened up to the outside world in 1978 with the economy growing at a remarkable rate, averaging almost 10 per cent per annum.

"Today, the leaders of China have a global outlook. They have a clear vision of the future and have the ability and the understanding needed to steer China successfully into the 21st century."

"Their perception and understanding make us confident in the exercise of a high degree of autonomy for Hong Kong under the 'one country, two systems' concept," he said.

Apart from the trust in China, Mr Tung said Hong Kong had much else on which to base its confidence.

"There is the solid foundation we have in the rule of law. This underpins our free market, the work of our civil service and the quality of our community. We will maintain this legacy," he said.

"The rule of law has kept our society open, fair and law abiding. Our excellent police force and vigorous anti-corruption body have cracked down hard on anyone breaking the law. We will maintain that effective enforcement and will uphold the principle that everyone, Chief Executive included, is subject to the law."

Mr Tung said Hong Kong was blessed with a superb civil service, committed to the very highest standards of public administration.

"Thanks to their careful management, we have a very solid fiscal position, steady revenues, well controlled expenditure and extremely strong financial reserves. Ample reserves are a comfort, but my greatest reason for confidence is the indomitable spirit of the people of Hong Kong themselves. What they have achieved within my lifetime is staggering."

"We have experienced entrepreneurs and investors and an increasingly well educated, forward looking pool of young people, giving us the talent and the drive to keep on succeeding in whatever the world holds for us."

Noting that Hong Kong's prosperity was built on the firm foundations of a free market, free enterprise and free trade, maximum competition and a level playing field, Mr Tung said none of these would change under his administration.

"My government will continue to provide a stable environment, facilitating, not directing the market so that the private sector can maximise its contribution and make the best use of the opportunities available."

"We will continue to encourage foreign investment and attract multi-national corporations to come to Hong Kong. We will provide a favourable investment climate and the necessary infrastructure to support their operation in Hong Kong."

Stressing the importance of being alert to challenges which lay ahead, Mr Tung said the Government's foremost task was to enhance Hong Kong's economic vitality and sustain the economic growth that provided the means to improve the livelihood of the people of Hong Kong.

"We aim to create a business environment and provide an educated, well trained workforce, that will promote the services sector and the development of value-added and high technology industries," he said.

"We will also carry on with the development of our institutions of Government to the timetable laid down in our constitution, the Basic Law. We are doing that not because we have been told by people in long established democracies, but because we know how important it is to Hong Kong."

Mr Tung said he had been chosen for a five-year term by an Election Committee composed wholly of Hong Kong people, drawn from every walk of life.

"In 2002, my successor will be chosen by a similar committee of Hong Kong people," he said.

"In May next year, elections for first full Legislative Council will be held. Members of every political party will be welcome to take part, every adult permanent resident eligible to vote. Those elected will serve for two years."

In 2000, the second Legislative Council will be elected for a four year term, and in 2004, for the third election, half the seats will be returned by direct elections. After ten years, the Basic Law makes clear that it is for Hong Kong people to decide for themselves how to develop the Executive and Legislative elections, with the ultimate aim of universal suffrage.

"It is a document drawn up for Hong Kong's condition, providing stability in the organisation of our government while maintaining the steady evolution of democratic institutions," he said.

"There is much that needs to be done in Hong Kong, but we have a solid foundation upon which we can build our future, and we have the commitment and support of our sovereign to make 'one country, two systems' a success.

"All of us in Hong Kong are confident that as we move into the 21st century we can write wonderfully new and successful chapters in the history of our city."