Remarks of Commissioner Donald Tong at a
Chinese New Year Reception in Washington, D.C

24 February 2009

Dear Friends of Hong Kong, Ladies and Gentlemen,

First of all, a big welcome to all of you for joining our Chinese New Year Reception tonight as we usher in the Year of the Ox. I am particularly honoured to welcome Acting Under-secretary of Commerce Hill; and Deputy Chief of Mission of the Embassy of the People’s Republic of China Mr. Xie. Thank you for joining us.

2. For friends anxious about their economic fortunes, take comfort in knowing that there is no bear in the Chinese zodiac. The Ox is a sign of prosperity, but prosperity gained through patience and resilience. Through the close collaboration of all members of the global village, we are hopeful that we will be able to combat the financial turmoil, protect jobs, and entice a bullish market in the Year of the Ox.

3. I am no stranger to Washington having worked in the Hong Kong Economic and Trade Office in the early nineties. I am glad to return to resume the duty of strengthening Hong Kong-US bonds.

4. It was an auspicious start to 2009 as Hong Kong was ranked the world's freest economy for the 15th consecutive year by The Heritage Foundation and The

Wall Street Journal. Such an accolade is a strong endorsement of our free market philosophy, low taxes, and free flow of people, ideas, capital, and information.

5. The Hong Kong economy performed reasonably well in 2008 with economic growth expected around 3%. Visitor arrivals increased by 4.7% to 29.5 million while total exports grew by 5.5%. For the first half of 2008, some $34 billion in foreign direct investment came into Hong Kong – 25% more than the same period in 2007. This underscores Hong Kong's appeal to a growing number of international companies as a platform to reach China and Asia Pacific markets.

6. As an externally oriented economy, Hong Kong is not immune to the global financial crisis. Economic growth faltered in the last few months and the unemployment rate has climbed to 4.6%. Like many economies, negative economic growth and rising unemployment might be inevitable this year. However, our Government has put in place a range of measures to deal with the challenges.

7. Since the Asian financial crisis a decade ago, Hong Kong has reinforced its financial markets by improving risk management of banks and creating a more transparent regulatory system. Our banking system and financial industry remain stable and healthy. To ease liquidity for businesses and bolster confidence, our Government has guaranteed all bank deposits, without ceiling, and established a mechanism to provide additional capital to banks, if requested, until 2010.

8. We also introduced a $12.8-billion loan guarantee to unfreeze credit for businesses, particularly small and medium enterprises. In addition, Hong Kong and the Mainland have agreed on a currency swap pact of $29 billion to provide short-term liquidity to Mainland operations of Hong Kong banks and Hong Kong operations of Mainland banks, as needed. To tackle rising unemployment, our Government has increased public expenditure, largely through fast-tracking infrastructure projects, to create more than 60,000 jobs. Public bodies and the private sector have also pledged to create thousands of short-term jobs and internships targeting fresh graduates.

9. We are confident that these measures will help us weather the storm.

10. To pave the way for further development, we have introduced new initiatives. We have intensified development and global promotion of Hong Kong as a destination for “Meetings, Incentives, Conventions, and Exhibitions” or MICE in short. In addition, we have waived our hotel accommodation tax.

11. We have also waived our duty on wine with a view to developing Hong Kong into a hub for wine-related business. American companies wasted no time in seizing the opportunity and have already conducted successful wine auctions in Hong Kong. For visitors needing assistance navigating Hong Kong's 9,000-plus dining options, we are glad to tell you that the prestigious Michelin Guide now includes Hong Kong and Macau – China’s first Michelin rated cities.

12. Boosting Hong Kong's appeal as a tourist destination, Hong Kong will construct a new cruise terminal at the old Kai Tak Airport site with the first berth expected to be operational in 2013. We will also develop a 100-acres cultural hub in West Kowloon which will feature world-class performing arts venues, a new concept museum, an exhibition centre and galleries.
I hope all these new initiatives coupled with our shopping paradise which does not charge sales tax will put Hong Kong in your radar screen when you plan your next vacation.

13. The Mainland Government has also introduced measures to reinforce our status as a global financial center and foster economic cooperation between Hong Kong and the Pearl River Delta. For example, a pilot initiative was announced in last December to expand Renminbi settlement for international trade with the Mainland. This will give Hong Kong a good opportunity to further enhance our role as an off-shore centre for Renminbi business. Separately, we are making progress in establishing Hong Kong as a platform for Islamic finance.

14. With regard to constitutional development, Hong Kong continues to make strides as the elections of the Chief Executive in 2017 and all members of the Legislative Council in 2020 may be returned by universal suffrage. With a timetable set, the Hong Kong Government will consult the public in the fourth quarter of this year on how the electoral methods for the Chief Executive and Legislative Council in 2012 should be amended with the aim of laying a foundation for attaining universal suffrage as prescribed by the Basic Law.

15. Hong Kong and the U.S. have long enjoyed close ties. The strength of this relationship is illustrated by the U.S. topping the list of countries with regional operations in Hong Kong – increasing to over 900 in a decade’s time. This is a vote of confidence in our role as Asia's leading business hub and a reliable partner for U.S. businesses.

17. As we move forward, I know that our America friends will continue to support our efforts in bolstering Hong Kong-US ties.

Last but not least, may I take this opportunity to wish you all good health and prosperity in the Year of the Ox.

Kung Hei Fat Choi!

Now I would like to invite my HKETO colleagues on stage to propose a toast.