Following is the transcript of the press conference by the Hong Kong Special Administrative Region Chief Executive, Mr Tung Chee Hwa today. Please note that the transcript will be issued in the language that Mr Tung has spoken. The full text will also be sent by fax manager.

(click here for questions raised in Chinese)

Mr Tung: Welcome, ladies and gentlemen. I am pleased to have this opportunity to be standing in front of you. I'm glad to see you all here this second day of the Hong Kong SAR. It's been a very successful, very happy day for myself personally, for the 6.5 million people of Hong Kong, and for Chinese people all around the world. I hope you have also enjoyed yourself in Hong Kong, although I know you've all worked very hard covering the news.

We have been very fortunate and happy to have the very senior Chinese leadership to join us for the celebration in Hong Kong. Our President, Jiang Zemin, reaffirmed again that one country two systems, Hong Kong people governing Hong Kong with a high degree of autonomy, will remain unchanged for a long, long, long, long time to come. He's also declared that the Basic Law will be observed by all departments of the Central Government, all the provinces, all the autonomous regions and municipalities directly under the Central Government.

Mr Jiang stated time again that no department of local authority or no department period, would be allowed to interfere in affairs which should be handled by Hong Kong Special Administrative Region on its own. These reassurances, I have heard before many times, have been very reassuring when he spoke yesterday.

Over the past few days I have had opportunity to meet many emissaries from different countries. Each of these emissaries have brought with them the goodwill and the best wishes for China and for Hong Kong and they all share, not only the happiness, but also the confidence that we all have for the future of Hong Kong. I took the opportunity to establish some friendships through these very important discussions.

My senior officials and I have given interviews to some of you and millions of people around the world have witnessed the handover ceremony through your efforts. It is a very happy event for us and I'm very pleased that the event went well. It was very smooth, increases our confidence for a better and brighter future.

As you are aware, we have been very busy in the past 36 hours. Some of us didn't quite get enough sleep. We had to define new laws, establishing the government and attending numerous functions organised by the committee, all officially, to celebrate the re-unification.

I have spoken yesterday twice, once early in the morning, the other time at 10 am, where I have outlined some of the issues which I believe need to be looked at and I shall be happy to answer any questions you might have.

Thank you very much.

Question: Mr Tung, Philippe Paquet from La Libre Belgique, Brussels. Should a major conflict occur between China and Hong Kong, would you stand with Hong Kong or would you side with Hong Kong?

MR Tung: I'm sorry, I missed your question.

Mr Paquet: Should a major conflict...

Mr Tung: Oh, conflict.

Mr Paquet: ...occur between China and Hong Kong, would you side with Hong Kong or would you stand with China?

.......: Where do you come from, please?

Mr Paquet: I am from a newspaper in Brussels, La Libre Belgique.

Mr Tung: Well, first of all, let me tell you this, that this is a very happy event for all Chinese people. We are in a celebration mood but having said this, I also want to tell you that the long-term interests of China and Hong Kong are the same. The more prosperous we are, we contribute to China's continued modernisation. The more successful China is, Hong Kong will become even more prosperous. So our long-term interests are the same. In terms of the short-term, there will be conflicts and obviously they will need to be talked through in order to make sure that our interests are looked after so it is something that we will watch very carefully. But the important thing is that our long-term interests are very similar.

Question (Radio New Zealand): There are 4,000 New Zealanders living here in this country, a lot of investment, quite big ones, a lot of small businesses and so on, and a lot of trade. What future do we have under the Hong Kong SAR?

Mr Tung: I think you have a great future here. In fact, like all the other international business communities because, as I said in my speech, my intention is to maintain Hong Kong's economic vibrancy and to continue to create wealth for the people, and I think there will be lots of business opportunities, not only just for the local people, but also for the international business community. And number two is that I've said time again that we are a predominantly Chinese society and I will want to re-emphasise some of the very traditional but very good traditional Chinese values but, on the other hand, we have been influenced by the west and there are many areas where the west is very good. I'd like to see a society which combines the best of the east and the west. And thirdly, I'm determined to keep the status as a premier international city, a cosmopolitan city and I think New Zealanders - I mean, you're good at business, you're also very good at playing football - you're all welcome.

Question : Yes. I am newspaper Cladine (phonetic) from Argentina here. Mr Tung, do you think this successful handover can be an example for another cases of British colonies like Malvinas, called Falkland Islands, or Gibraltar?

(Request for question to be repeated)

Question: If Mr Tung thinks that this successful handover can be an example for another cases of British colonies like Malvinas, called also Falkland Islands, or Gibraltar?

Mr Tung: I think I get the question. I think the successful transition is a very good example to settle international issues that are left to be settled by history. The co-operation of the two governments, although at times difficult, on the whole has been all right and I think it's a good way to move forward to settle any international disputes or -- not really disputes -- to settle international issues that have been left there by history.

Question : Mr Tung, in light of your speech yesterday establishing that housing is your number one priority, please describe the housing situation as you see it today and how much money you think it's appropriate to spend on public housing. My name is...from Dallas Morning News from Taxas.

Mr Tung : Housing is our number one priority because there are 150,000 waiting for about seven and a half years to be housed in proper, respectable accomodations. Housing is our priority because middle class who want to own their own homes see their dream of ownership evaporate. Housing is important because too expensive rental at the high end will hurt our competitiveness as a regional service centre. So, it is a very important priority. How much money do we want to spend on it. The truth of the matter is that when Government reclaims land and moves forward either with reclamation or with finding land here and there, and put up the necessary infrastructure, very often you end up in the plus column because the value of the land in Hong Kong is really quite high. So, although there will be some financial burden, I do not expect the financial burden to be very serious.

Question: Mr Tung, Secretary Albright invited you to the United States and I'm wondering when you plan to go. And as a second question, whether you or anyone in your family has an American passport?

Mr Tung: Well, first of all, Secretary Albright has kindly invited me to go and I was very grateful for the invitation. I told her that when I settle down a little bit, when I get enough sleep, when I start meeting with my principal officials to map out the priorities and schedules for the next six months to a year, I will let her know as soon as possible when I will be going. No date has been fixed yet. On the second point, all my three children were born in America. They all hold American passports.

Question (ITN Channel 4): Will there be any legal action taken against the Democratic Party for their demonstration on Monday night on the balcony and does the Provisional Legislature have any legal standing to prosecute them. Thank you!

Mr Tung: As you know the Provisional Legislature has total legitimacy and very solid legal foundation. (inaudible) the first point is concerned, I think people were curious at least what would happen on June 30 as far as demonstrations are concerned. And I have repeated many times that demonstrations, so long as they are lawful, so long as they are legal, they can go right ahead. The objective is to make sure that this sort of culture continue to be there although we have to be mindful of the right of the community as a whole. Now the Democratic Party and some others have demonstrated on June 30th to voice their concern. This is fine. I am very happy that particular event did not take away from the celebration that we will all having as Chinese people in Hong Kong on this very great day for us.

Question: Mr Tung, the Times Newspaper London has been on its knees in front of you for 10 minutes. Very rare. Except when speaking to friends from Taiwan, are you always going to speak in Cantonese at press conferences, if you speak Chinese? And my second question is, in your speech yesterday you said that you thought that confrontation was not such a good thing, but do you think that the kind of demonstration that happened yesterday, those people who were demonstrating, those 5,000 people, is that confrontation or is that a part of the culture of Hong Kong? Thank you.

Mr Tung: Jonathan, I'm sorry you are on your knees. I didn't notice that. Firstly, if the journalists ask me questions in Cantonese, English, Mandarin, or Shanghainese I will be able to answer exactly in the right manner in response. But if you ask me in French or Fukienese, I'm sorry I can't answer them, I don't know how to speak the language. Insofar as the second point is concerned, are these demonstrations good? Well, it gives the demonstrator the opportunity to say things. Would I do it this way? Obviously not, because I think there are many channels open to communication. I would have thought there were better ways of communicating.

Question (ITN Channel 3): Do you see the SAR's relationship with Britain prospering or declining given Tony Blair's refusal to attend the swearing-in yesterday morning, or do you not see that as an insult?

Mr Tung: I had very useful discussions with the Prime Minister and the Foreign Secretary and the emphasis is on putting aside the past. Let's move forward together for the future. This will certainly be the emphasis of the SAR administration. British businesses have been very important to Hong Kong. I think they will find the environment continues to be attractive for them - British people, expats who have lived here, worked here, very much part of our community - and I would hope they will find the environment in the future just as attractive if not more attractive. Together we go on to build a better Hong Kong. And the third point I'd like to tell you is that I suggested very strongly that for Hong Kong's future, it is important for Britain to mend fences with China and I think, and I'm glad that there will be some effort in that direction, because I've noticed that Mr Cook is going to visit China later on this year, and the Prime Minister perhaps next year.

Question: Good afternoon, sir. My question concerns about the Filipino community here. What does the future hold for more than 150,000 Filipino domestics in Hong Kong? Will they still enjoy the same privilege under your administration?

Mr Tung: The Filipino domestic help is very much part of our community and I hope they will be here for a long, long time to come.

Question: Mr Tung, Derek Johnson from TVB News. You've spoken in the past, you've said in the past that Hong Kong has become too politicised in recent years. Now that you are Chief Executive, do you intend to try to make it less political and, if so, what does that mean and how are you going to do it?

Mr Tung: Are we too politicised? Let me ask you, how can we in two or three weeks pass through all these legislations, some of them without proper study, certainly without proper consultation and many of them will have long-term implications for our community as a whole? You ask me, are we politicised? You give me that answer. Could I just go on to say, to take this opportunity, I'd like to re-emphasise, each one of these laws, each one of these amendments, is being studied by the administration and we will do what is necessary to protect this community.

Question: John Higgins from The Guardian, London. Mr Tung, you have said that legitimate political organisations can take part in the political process. Can you define "legitimate" and can you give us an example of an illegitimate organisation?

Mr Tung: They are properly registered, they are legitimate. For instance, the Democratic Party, I think, I hope they will participate in the future elective process. I'm given to understand that they will. I'm pleased that they will because I'd like to have all parts of our community involved in the political process.

Question (Kyoto News): Just for the record, when do you expect the next Leg Co election to take place, in what month? Question number two, you set down a 10-year plan for housing. You said a 10-year plan for the housing policy, for universal suffrage in Hong Kong, how many years do you expect universal suffrage to be here?

Mr Tung: Insofar as the question of universal suffrage is concerned, I think, we have just begun with a democratic progress and I would hope in a number of years' time, we should be able to evaluate how fast we go. For the time being, for the next 10 years, the Basic Law has been very clear as to the democratic process evolution. I would think it is a good and reasonable speed in which to move forward. Insofar as your first question is concerned, we are all working very hard to have the election for the first legislature as early as possible. My guess is that it would be in the second quarter of next year. I shouldn't say my guess, I know it will be in the second quarter of next year. I don't want to tell you the precise month yet.

(Note: the last few questions were asked in Chinese)