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The following is the transcript of the English part of the media session given by the Chief Executive, Mr Tung Chee Hwa, at the lobby of the Central Government Offices this (Friday) afternoon:

Mr Tung: Good afternoon, the Financial Secretary has just announced the first quarter economic data. I know they were disappointing.

As you are all aware, we are going through a rather painful period of economic adjustment - a necessary period of economic adjustment - the pace of which has been accelerated by the turmoil in this region. As I have pointed out on many occasions in the past, years of high property prices, high inflation, negative interest rates and high wage increases have created a bubble economy which needs to be adjusted if we are to remain competitive.

The government understands the pain these adjustments cause to the citizens of Hong Kong. We have been working very hard to formulate measures to reduce the pain. The measures the Financial Secretary just announced are aimed at easing credit squeeze, stabilising property prices and promoting tourism, all of which are very important at this moment.

These measures are in addition to the measures that were announced by the Financial Secretary on February 18th in the Budget. In the Budget there was a huge tax cut. There were also huge increases in spending and in investment in infrastructure. I would like to remind you that the total investment in infrastructure over the next five years will be HK$235 billion. It is a huge investment not only in money terms but demonstrates our confidence in our future.

I want to assure you that we understand the pain and the government is determined to do whatever we can do to reduce the pain and to revive our economy and to improve our competitiveness.

In Hong Kong we have met many challenges before. In 1974/1975 we had three quarters of negative growth; in 1985 we had two quarters of negative growth. But each time we were able to come out of these difficulties and we became stronger and better. So there is no reason for us to lose confidence.

I therefore would like to urge the entire community not to be depressed, not to be pessimistic about the figures today. Let us not forget, one of the key features of a free market economy is that it can go down fast - it can also come up very fast. After this economic adjustment, I know we will regain our competitiveness quickly.

I have, really, very good reasons to be positive about the medium term future of Hong Kong's economy. First, the sustained and orderly growth of the economy on the Mainland and the deepening of the reform, will give us many opportunities to expand our economy. Second, our fundamentals in finance are very strong. We have a huge fiscal reserve. We also have very predictable government policies, low taxation, and a very clean and accountable government.

And more importantly, I want you all to remember what makes Hong Kong tick is our people, the good quality, the efficiency and the entrepreneurial spirit of our people. So let us not lose heart. What we need to be doing now is really to improve ourselves more and more, so that we can prepare for greater economic opportunities ahead.

I have every confidence, together we will pull out of this difficulty - and it may be somewhat prolonged - but we will pull out of this difficulty and we will do well, as we have done in the past. Thank you very much.

Question: Mr Tung, were you personally surprised by the figures that came out for the first quarter of GDP, and do you think your administration could have acted faster to stem the problem if you're aware that they were coming on?

Mr Tung: I think these figures were worse than we expected. We knew the seriousness of the economic downturn but these figures were worse than we expected. Frankly speaking, because we knew there will be a slow-down, the Budget, when it was presented, was designed with that in mind. And other suggestions we made today, were really made after very careful consideration, after a great deal of consultation, to make sure that if we do announce these measures they will be effective. So I just want to assure you ,we are on top of the situation.

Transcript of Chief Executive's media session (Chinese part)

End/Friday, May 29, 1998

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