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Hong Kong Business Summit '99
"Hong Kong, China: Into the Next Millennium"

December 2, 1999

Remarks by Chamber Chairman CC Tung at the start of the General Committee Panel Discussion (11.30 a.m. for 5 minutes)

Good morning again, ladies and gentlemen,

I hope you enjoyed the morning sessions thus far.

It is now back to work with the Panel Discussion with General Committee members.

Here with me today are seven of my fellow GC members, who I am sure are well known to most of you -- Mr Christopher Cheng, Dr Lily Chiang, Mr Anthony Nightingale, Mr Linus Cheung, Mr Victor Li, Mr Liu Mingkang and Mr K K Yeung.

We also have up here our Chief Economist.

I will open the session with a few general economic remarks.

There will then be three other presenters before we open the session to your questions for all the panelists.

They are Mr Linus Cheung on Telecommunications, Mr K K Yeung on small and medium sized businesses and our Chief Economist with the economic forecast and results of the 1999 Business Prospects Survey.

As I mentioned in my opening remarks, this year's Summit is being held against a far more positive economic background than was last year's.

We at the Chamber are now cautiously optimistic that the local economy is set for good growth in the year ahead and into 2001.

The new Millennium will, therefore, begin well for the SAR.

I have had the opportunity to look at our Chief Economist's forecasts for the year ahead and they show that, barring any external shocks -

Gross Domestic Product of the Hong Kong SAR is expected to expand by 4 per cent in 2000 after 1.8 per cent growth this year.

Consumer price deflation will moderate as the year progresses.

Domestic consumption will improve and external trade will increase through the year in its normal annual seasonal pattern.

But interest rates will remain high in real terms and any further rise in US rates early in the New Year will push them higher.

Unemployment will stabilize but remain high.

Private sector investment will remain weak, but Government infrastructure spending will continue to pick up the slack.

In my own view, I think we can be well pleased with the recovery that is under way in the local economy, but that we all have to admit that the rebound is still relatively tentative, although improving all the time.

More still needs to be done to ensure a sustained upturn, both within Hong Kong itself and from a broader regional economic perspective.

We also need to see positive economic conditions maintained globally for local recovery to proceed.

But at least the signs are promising, with greater stability in the region, continued growth in the US and in Mainland China, and a better outlook in Japan and the European Union.

This augurs well for future expansion, as we say good-bye to the old Millennium and welcome the new one.

The local share market has rebounded strongly since the recent low point of August 1998 and the property market has stabilized.

There are some signs of a consumer recovery, although private sector investment remains weak and real interest rates are high.

The Government has moved purposefully to further strengthen our financial system and our securities markets.

Although we were clearly badly affected by the onset of the East Asian financial crisis in the late 1997 and in 1998, the resilience of the local economy is apparent in the current recovery.

With substantial asset price adjustments, the Hong Kong SAR is now a somewhat less expensive place to do business, although property and wage costs are still high.

This has given us some new measure of competitiveness. It also has been helped by the recent depreciation of the US dollar, particularly against the Japanese Yen.

But the importance of the rebound is not so much the recovery itself, but the better background it provides for the bigger decisions that have been taken affecting the SAR.

Hong Kong is really reinventing itself yet again to play a new role as a world class city in the new Millennium - as the SAR Chief Executive has put it.

In recent weeks and months, in particular, we have seen some important developments that effectively illustrate how the Hong Kong SAR is preparing for its future economic expansion.

Apart from the recovery in the overall economy and the share market, these have included :

• Cyberport - the Government's agreement on the Cyberport served to highlight its determination to develop the SAR's information technology and overall higher technological capabilities. Cyberport had the effect of kick-starting interest in Hong Kong's high technology focus both here and overseas.

• Disney - the agreement to establish a Disney theme park underlined the Government's commitment to new infrastructure developments and the expansion of the tourism industry.

• Policy Address - it emphasised the Government's commitment to improving the environment, developing local skills and talent, and pursuing the innovation and technological vision.

• Tracker Fund - the successful launch of the Tracker Fund reflected the Government's commitment to further developing the local financial markets and unwinding the Exchange Fund's own positions in the market, established in August 1998 with its market incursion.

• China-US Trade and WTO - the agreement highlighted the dramatic developments that are occurring which will make Hong Kong, China and the region one of the world's key centres for growth in the new Millennium. The Chamber believes there are opportunities and challenges for Hong Kong business after China gets into WTO. Our Chamber report on this impact is due to the released on January 18.

These are just some of the initiatives we need to look at in considering the immediate outlook for the Hong Kong SAR.

But I think I will leave my remarks there and allow us to move on to our next speaker, Mr Linus Cheung.

Linus?