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Following is the transcript of the press conference given by the Chief Executive, Mr Tung Chee Hwa, in Sydney this (Monday) afternoon:

Mr Tung: Good afternoon ladies and gentlemen. I am delighted to be here in Sydney. This is my first trip - official trip - first trip in fact to Australia after the reunification. I am really grateful for being very warmly received here, in Sydney. The hospitality is very warm, the weather has been marvellous.

I have also had the opportunity to talk to political leaders and business leaders here in New South Wales. We had the opportunity to exchange views about the impact of Asian financial turmoil on Hong Kong, on Australia, on the region as a whole. I also had the opportunity to explain to all my friends how well Hong Kong is doing under "one country, two systems" as we move forward, and also explain in detail how the financial turmoil is impacting on us.

I am taking this opportunity of being here in Australia, in Sydney, I also have tried to discuss with many leaders how important this Hong Kong-Australia relationship is, how important this Hong Kong-New South Wales relationship is and the purpose of my trip is to make sure that this relationship is further enhanced because it is not just the trade and investment relationship, it is also a people relationship. Thousands of students are studying here, we have many who have migrated to this great city and are living here and you told me there are 30,000 Australians who work in Hong Kong. So there is a very important people relationship as well as all the investment relationships and trade relationships.

So it has been a very rushed trip but a very useful trip for me. After this press conference I am flying off down to Melbourne and I will be there until Wednesday before I go on to New Zealand. Thank you very much.

Reporter: You were quoted last night as saying that Asia must become Australia's conscience? Can you explain what you meant by that?

Mr Tung: I don't think I said this at all.

Reporter:: Well, if I can continue to ask ... something that you said in a speech last night ..... a question about what do you think Asia's role is in responding to what is happening here?

Mr Tung: As I said earlier on at the lunch, I am the guest of the Australian Government so it is really not appropriate for me to comment on this political issue. But what I was saying is that Australia has been a very successful and tolerant society which practises multiculturalism and this is where Australian strength is and I can't imagine Australia deviating from this very successful pattern of the past.

Reporter: Mr Tung, there have been rumours over a while, essentially from Dow Jones News wire and the rumours over the last 24 hours in particular that the Chinese Government might be backing away from its pledge not to devalue Yuan. Can you reflect on that and the impact of devaluation?

Mr Tung: I cannot see a devaluation of the Renminbi at all. China have made it very clear that they would not devalue the Renminbi and I have every belief that this policy will not change. From an economic point of view -- He has left! Shall I continue or not? I don't know whether it has happened to you. It has never happened to me.

Reporter: I am just wondering --

Mr Tung: Can I just finish on the question he asked me. I think even from an economic point of view, I just can't see that China would want to devalue its currency. Obviously there will be -- Oh, you are back! -- Obviously you will need to look at the economic fundamentals and in looking at the economic fundamentals you will see China's exports actually increased in the first quarter by about 12% and that it has a trade surplus of about $8.7 billion. Foreign direct investment in the first quarter also increased by close to 10%. So these are all fundamental figures which tell you that devaluation is not in the cards.

Of course the further devaluation of some of the Asian currencies, particularly the Japanese, will affect some exports from China but I think there is no need for China to devalue its currency, both politically and economically, from both points of view this will not happen.

Reporter: (about Hong Kong students going to Australia)

Mr Tung: I think, I understand the One Nation Party has 23% of the vote, the other 77% must be saying something else. So I am sure that Australia as a nation will make sure our students are welcome here. Australians in Hong Kong, they are wonderful people and I can't imagine it will be any different.

Reporter: (about economic forecast)

Mr Tung: I will answer all those questions if you promise me not to go away in the middle of it. Let me answer the third question first. I think, as I said - Were you at the luncheon when people asked me questions?

Reporter: No, sir.

Mr Tung: So I shall be very brief. I think that Australia does have a very useful and effective role to play as a member of the Asia-Pacific community of nations and Australia's role is indeed very unique. As to how Australia plays the role in the future, under what structure, I think there is always room to think through what is the thing to do, but the existing APEC structure is the relevant structure that can be done and the important thing is that Australia is still engaged in Asia and I am sure you will do this.

Insofar as the GDP forecast of 3.5% is concerned, we will be revising our forecast in August, after the second quarter forecast, and our practice is not really to revise it all the time. We have set up rules as to when we would be revising our forecast and we will do so in August. Obviously, I have said many times that we are going to have a few difficult quarters ahead and that will be the case, but I am afraid I am not going to give you particular figures at this moment. I think to make sure Hong Kong people do not become too depressed by this difficulty is really very important and it is the responsibility of the government as well as the private sector business in Hong Kong to do that. But let me tell you this, that Hong Kong people are full of entrepreneurship and I have no doubt that Hong Kong will rise up to that particular occasion.

I would like to say one more thing about Hong Kong and Australia and you have heard me say this already inside the room but there is one point I left out and that is, among many of the other areas of co-operation, Australia is at a very advanced stage of development insofar as hi-tech is concerned. Because of our own keen interest in that area in the area of information technology, we would hope that we will be working closer ...in the future also.

Reporter: (inaudible)

Mr Tung: ... I think insofar as this One Nation Party issue is concerned, I have said what I have said and I have every confidence in the Australian people wanting to maintain the multiculturism which has made Australia so successful in the past and I don't think I want to say any more on this.

Your last question was about my meeting with the Minister of Immigration, Mr Ruddock. He is an old friend of Hong Kong and we chatted about different things and one of the things I appeal to him was to speed up the decision making on electronic visa which will enable Hong Kong people to come to Australia more easily, and I know this is a subject which is being very carefully reviewed by your Government, so we are hoping for some answers in the near future.

Reporter: Mr Tung, one of the most important events for Hong Kong Residents was the election. If I could also ask a slightly double or triple barrelled question. What was your reaction to the fact that there was such support in terms of numbers, I think something like 60% of voters for the pro-democracy candidates ...? Given that support and the fact that they only got 30% or thereabouts of the seats in the legislature, will you be looking to reforming the actual electoral processes for the functional constituencies and the six members of the Election Committee - I know you can't increase the number of directly elected seats - but within the Basic Law before the election in two years time?

And thirdly, your Secretary for Justice, Miss Leung, at the weekend referred to various laws, in particular labour laws, which had been repealed by the Provisional Legislature, passed by the previously elected legislature. If the present elected legislature wants to introduce bills which conflict with government policy, such as those for instance, if hypothetically they wanted those, will you consider or do you feel you are tied under the Constitution, the Basic Law, Article 74 ...?

Mr Tung: Well, let me first say this insofar as your third question is concerned, that the new legislature has been elected, we are looking forward to working closely together with the legislature for the common good of Hong Kong. So let us not assume what will happen or will not happen. The legislature will meet on July 2 for the first time and I am hoping that we will have a good relationship, moving forward together.

As far as your first question is concerned, we are very proud that 53% of the eligible voters chose to vote on May 24, and three newspapers did some polls and all of them came out with the result that about 60% of those who voted it was because they wanted to exercise civic responsibility for the first time under the SAR, and I think it is a very good thing that they did that. Insofar as the pace of democracy is concerned, it is very clearly defined in the Basic Law. There will not be any changes to it. Insofar as the functional constituencies are concerned, which you refer to specifically, there will not be any changes to those either because the functional constituencies which were originally designed, was for the purpose ... to ensure that those who had contributed a great deal to Hong Kong in the past would have a say in the running of Hong Kong. That was the purpose and it will remain the purpose and no plans to change this principle.

The figures will come out later on today. As I have said a number of times already, we expect the unemployment numbers to get worse. The adjustment process is very painful. Certainly, in the Government we feel this pain a great deal but we have announced a series of measures to cope with the situation in the short term. In the Budget which was announced back in February, we also have included huge tax cuts and expenditure increases and investment increases. All of this will eventually come in and play the part in stimulating the economy but it must be given time to work. In the meantime, of course, things might get worse before they get better and all I can say is that it is a painful process which we are very much aware of.

Reporter: Mr Tung, for the benefit of our Chinese channel --

Mr Tung: Can you ask me that in Cantonese?

Reporter: Maybe, if I have plenty of time.

Mr Tung: (Cantonese)

Reporter: ... the Japanese Government should get on with it rather than just ... a downturn, and what steps the Japanese Government should take?

Mr Tung: The Japanese economy is the second largest in the world and the continued depreciation of the Japanese Yen is having an enormous impact, not just in this region but all around the world. The stock market in Hong Kong fell again this morning very substantially, the interest rate has gone up, so it does really have a direct impact on us and I know, on the other countries in this region and around the world. Specifically as to what needs to be done in Japan, I think it is really up to the Japanese Government. We ... can only... appeal to Japan to do whatever is necessary to get on with it because a stable Yen and a strong Japanese economy is very, very important to the well-being of all of us.

Reporter: The idea of a recession simply sounds so alien to us. I think most Hong Kong people --

Mr Tung: Given the fact that the economy is going to be difficult for some time in Hong Kong, we really need to work together a lot harder. But let me say this to you again. Hong Kong has very good fundamentals. We have huge foreign exchange reserves, we have huge fiscal reserves, we have no debt whatsoever and we are investing in our future with HK $235 billion of investment in railways, highways, in schools, in information technology, investment in environmental projects which will make Hong Kong more liveable and more attractive to live and work. So we are investing heavily in the future and we know we will make Hong Kong more successful in the future.

Of course the present difficulty needs to be overcome but we are uniquely positioned to move forward because of the financial strength we have with us in Hong Kong.

Reporter: Just wanted to ask quickly, you mentioned ... that your GDP, you expect to be revising the figure downwards. And also just to clarify, earlier on in the context of unemployment you said it might get worse before it gets better and just to clarify unemployment with the overall economic situation.

Mr Tung: To answer your first question - were you at the lunch just now? You were. Good. It is not wise to be making a forecast standing here, except to say that the economy will continue to be difficult for some quarters. But let me emphasise that again that it is a painful adjustment period caused by the financial turmoil and by the bubble in our property market, and the correction will be painful. But we have very strong fundamentals and we will come out of it.

Insofar as your second question is concerned, I think unemployment, unfortunately, will get worse before it gets better. That is what I meant.

Question: And for how many quarters?

Mr Tung: Both as an economist and as a politician, I won't answer that question.

Reporter: Sir, I know you mentioned you have got a very busy schedule but I just wondered, if you have a chance for a bit of a breather, if you take a break ... if you have a chance for a break do you think Australia would be a good place to holiday?

Mr Tung: I think Sydney is absolutely beautiful. Yesterday afternoon I had a chance to walk through the Botanic Gardens and the waterfront was absolutely beautiful and I hope there is a chance for me to come incognito so I can have some free time to myself.

Chief Executive's press conference in Sydney (chinese part)

End/Monday, June 15, 1998

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