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Press Release - June 25 1998

Smooth Transition Overshadowed by Financial Turmoil

There is universal recognition that the concept of "One country, two systems" is truly being implemented and realised in Hong Kong, the Director of the Hong Kong Economic and Trade Office of the Hong Kong Special Administrative Region (SAR) Government, Mr. Donald Tong, said today (June 25).

This has been acknowledged by the British Government, the co-signatory to the Joint Declaration, and most positively in the recent US State Department reports to the US Congress, Mr. Tong pointed out.

Speaking to about 100 businessmen, politicians, members of Edmonton Chamber of Commerce and government officials at a luncheon organised by the Hong Kong-Canada Business Association, Edmonton Section, to commemorate the first anniversary of the establishment of the SAR, Mr. Tong also gave the audience a rundown of Hong Kong's achievements of the past year.

These include:

  • Per Capita GDP is now C$38,000 which is higher than some industrialised economies

  • Currently Hong Kong is the world's 8th largest trading economy; one rank below Canada

  • The territory operates the world's busiest container port

  • International air cargo throughput is the heaviest at Kai Tak airport and the fifth largest in terms of international passengers


However, Mr. Tong also admitted that during the year the SAR had unexpectedly been marred by the financial turmoil which battered many southeast Asian economies, including Japan.

"We realise that Hong Kong cannot stay immuned to the contagion and that is why our Chief Executive, Mr. Tung Chee Hwa, has just announced a package of measures aimed at alleviating the current problems we are facing and to smooth the adjustment to the economy now in progress," Mr. Tong said.

The package of measures include:
  • Exempting interest income earned locally from profits tax with immediate effect to improve liquidity in banks

  • Setting up a new C$377 million scheme to help non-export related small and medium enterprises to obtain loans

  • Suspending all land sales by auction and by public tender for the next nine months

  • Increasing substantially the quota of families eligible for the Home Purchase Loan Scheme and expanding the Home Starter Loan Scheme

  • Reducing duty on diesel oil by 30 per cent to provide relief to more than 22,000 taxi and light bus drivers

  • Freezing the adjustment of salaries of senior government officials for this financial year


Mr. Tong reiterated that in spite of the economic phenomena, Hong Kong will continue to ensure that the linked exchange system will remain intact; strictly adhere to market practices and follow the long-established financial management principle.

In announcing the package, the Chief Executive stressed that if the SAR Government did not maintain the US$-HK$ peg, the economic consequences would be unthinkable.

In his statement, Mr. Tung said: "If we do not have a comprehensive package to maintain the confidence of overseas investors, repeated pressure will be exerted on the Hong Kong dollar. Then the efforts we have made to relieve our economic difficulties will be in vain."

Turning back to the past 12 months, Mr. Tong said the institutions of civil society, e.g. the rule of law, an independent judiciary, an elected legislature, a free press, churches and non-government organisations remain not just intact but vibrant.

"Human rights in Hong Kong are also well protected. China has agreed to forward to the United Nations in August 1998 Hong Kong's reports on the implementation of the International Covenant on Civil and Political Rights and International Covenant on Economic, Social and Cultural Rights.

"Political protests which are now an integral part of Hong Kong's people's way of life of expressing their views, are alive and well. We have had more demonstrations in the year since the handover than in the year before."

Citing as an example that everything remained the same during the period, Mr. Tong pointed out that the names used before July 1997 such as Queen Elizabeth Hospital, Victoria Harbour, King's Road, etc. are still listed in official maps and directories.

The media are still very vocal and reports considered sensitive on the mainland of China are still being reported and commented on.

Emphasizing that the pessimists have been proven wrong, Mr. Tong said that as promised the SAR carried out its first elections to the legislature "freely, openly and fairly".

"The elections on May 24 was also a hallmark event of the year because 53 per cent of the registered voters took part in the balloting despite heavy rainfall," he said.

"We believe that the enthusiasm of Hong Kong citizens who went to the poll to vote for the candidates of their choice reflects the very strong support for the Basic Law and the spirit of Hong Kong people ruling Hong Kong."

On Hong Kong's economy, Mr. Tong said the economic adjustment will continue for a few quarters and will see very slow rate of growth in the near future.

"This is a painful adjustment process but we have experienced similar situations before - once in 1973/74 and another one in 1985. And, each time, we emerged much stronger and became even more competitive than before. I am confident that we will do it again this time."

Mr. Tong predicted that prices of property and stocks will rebound but at a more sustainable and gradual rate, adding that lowered property price and the cost of labour will present overseas investors, including Canada, a good opportunity to invest in Hong Kong.

In conclusion, Mr. Tong remarked: "I would say that as far as the political transition is concerned, Hong Kong has gone much better than most people expected. The financial turmoil has brought pain to everyone in Hong Kong but we understand that this economic adjustment is necessary if Hong Kong is to remain competitive in the long run.

"Hong Kong people are known for their resilience and this quality has taken Hong Kong time and again out of its economic crisis. We have absolute confidence that we will ride out the storm again this time. Of course, the presence of China, our motherland - an economy that is expected to grow by 8% per annum up to 2000 - will continue to benefit Hong Kong.

"As our new post-unification relationship grows and continues, you will find that there is no better place than Hong Kong to tap into the huge potential of what one day will be the world's largest market. A successful China and Hong Kong will no doubt contribute to the well-being of the Asian and global economy."

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