Chinese officials tell business leaders that Hong Kong's economic role to expand post-1997.

HONG KONG--(BUSINESS WIRE)--Jan. 19--A dozen Hong Kong business leaders returned Thursday from three days of meetings in Beijing with senior Chinese officials, and today characterized their discussions about the economic and investment future of Hong Kong as "extraordinarily positive."

Henry K.S. Cheng, managing director of Hong Kong's New World Development Co. and chairman of the advisory council of The Better Hong Kong Foundation, and Leonie Ki, chief executive of the Foundation, told a gathering of reporters here today that discussions in Beijing underscored for delegation members that the Chinese government fully recognizes the economic importance of Hong Kong to China.

"Without exception," Cheng said, "Chinese leaders expressed a strong commitment to support and build upon what they referred to as Hong Kong's four economic power centers - finance, trading, shipping and telecommunications - as well as its position as the leading business and services center in Asia.

"There have been indications of such support in the past," said Cheng, "but never before have we heard this so clearly or comprehensively articulated by the leadership of China. The fact that these views were expressed in Beijing, in direct discussions with business leaders versus via third parties is , I think, extremely significant.

"Any business leader or investor, hearing what we heard over the past several days from so many different senior officials, would have to come away with a sense of renewed optimism for Hong Kong," he said.

The delegation, representing The Better Hong Kong Foundation, met with Chinese Premier Li Peng; Vice Premier Zhu Rongji; Wu Yi, Minister of Foreign Trade and Economic Cooperation (MOFTEC); Dai Xianglong, Governor of the People's Bank of China; Zhou Daojiong, Chairman of the China Securities Regulatory Commission (CSRC); Gan Ziyu, Vice Chairman of the State Planning Commission; and Lu Ping, Director of the Hong Kong-Macao Affairs Office.

China's Intent: To Build On Hong Kong's Success

Cheng said that the discussions had convinced them that China is committed to ensuring Hong Kong's prosperity under the principles of "one country, two systems" and "Hong Kong people governing Hong Kong" after Chinese sovereignty over Hong Kong is resumed on July 1, 1997.

"We went to Beijing to communicate the concerns of the Hong Kong and international business communities on one hand, and on the other, to listen and understand further the Chinese Government's views and policies regarding Hong Kong's business future post-1997," he added.

"We came away with the clear impression that China is intent on ensuring that Hong Kong's status as the dominant business, financial and economic center in Asia be maintained, if not expanded," he added.

Unanimity Seen Among Bejing Officials

In providing a meeting-by-meeting account of the Foundation delegation's trip, Leonie Ki, chief executive of The Better Hong Kong Foundation, said that each subsequent meeting, culminating in a session with Premier Li Peng late yesterday, further reinforced the sense of unanimity in Beijing toward the important role China expects Hong Kong to play in the business and economic development of China and in Asia generally.

Where There Is Money To Be Made, Investors Will Come Says Zhu

Meeting Tuesday, January 16, with Vice Premier Zhu Rongji, widely recognized as China's dominant policy maker on economic matters, the delegation was told that Hong Kong's policies on July 1, 1997 will be no different than those on June 30, 1997.

According to Ki, Vice Premier Zhu told them that, in his view, "Hong Kong and Hong Kong's people need to have more confidence in themselves. Hong Kong is already Asia's leading center for business and finance, and it sits on the edge of one of the world's largest and fastest-growing economies.

"Hong Kong's future as a world-class center for business is bright and getting brighter. And Hong Kong residents have every reason to be confident about their own future and the prosperity of their region."

According to Ki, Zhu states, "I care personally about Hong Kong. "I read its newspapers every day. And clearly, there are some problems, such as unemployment. But these are all short term. In fact, they are structural and cyclical economic adjustments. In the long term, one must be optimistic about Hong Kong's future economic prospects. And we should have confidence in the potential growth of economic development in China, which will, in turn, benefit Hong Kong.

"Hong Kong is a place where money is made. And where there is money to be made, investors will always come" she quoted Zhu as saying.

Hong Kong To Remain Listing Center for Chinese Enterprises

In a meeting with Zhou Daojiong, Chairman of the China Securities Regulatory Commission, Ki told reporters Zhou said he "fully expected" Hong Kong would remain the major listing center for Chinese state-owned enterprises.

"He told us," Ki said, "that he was intent on improving the quality of Chinese enterprises listed in Hong Kong and on other world exchanges, and on increasing such firms' presence and transparency in the markets."

According to Ki, Zhou told the group that the Commission well understood overseas investors' concerns about the financial and accounting systems in mainland China. As part of China's commitment to all of China's -- not just Hong Kong's -- prosperity, Ki said Zhou pointed to new standards being drafted with the intention of strengthening securities supervision, which could be announced as soon as April or May.

Looking to the future, Zhou was quoted as saying that the China Securities Regulatory Commission hopes to strengthen cooperation between China's stock exchanges in Shanghai and Shenzhen and the Stock Exchange of Hong Kong, and with Hong Kong's Securities and Futures Commission.

Economic System, Free Trade in Hong Kong To Be Left Untouched

Minister Wu Yi, Minister of Foreign Trade and Economic Cooperation (MOFTEC) told the group later on January 16 that Hong Kong faces the world with China's full support.

"Madam Wu was adamant in her remarks that she expected the continuing stability of Hong Kong's economic system and free trade orientation will help ensure its continued status as a world trade, financial, shipping and information center," said Ki.

"Madam Wu told us that economic reforms on the mainland will continue and are very much in the interest of Hong Kong. And she said that China's entry into the World Trade Organization (WTO) will be beneficial to Hong Kong, as it will enjoy `rights of member,'" said Ki.

Two Currencies, Two Financial Systems, One Country

Ki told reporters that Dai Xianglong, Governor of the People's Bank of China told the delegation in a meeting January 17 that with China's strict adherence to the "one country, two systems" principle, he had no doubt that Hong Kong's position as a premier international financial center will be maintained.

According to Ki, Dai said that China will strictly adhere to the principle of "two currencies, two financial systems." The renminbi and Hong Kong dollar will coexist as two legitimate currencies of two different regions of a single sovereign state after June 1, 1997, Dai is said to have told the delegation, reiterating China's commitment to the Hong Kong dollar remaining the currency of Hong Kong, and to the retention of the Hong Kong dollar's link to the US dollar.

In addition, he said The Hong Kong Monetary Authority will operate entirely separate from the People's Bank of China and will continue to have its own policy in 1997 and beyond, according to Ki.

State Planning Commission Forecasts Hong Kong Growth Post-1997

The delegation met later on January 17 with Gan Ziyu, Vice Chairman of the State Planning Commission, who discussed the Chinese Government s Ninth Five Year Plan (1996-2000), said Ki.

"Mr. Gan was very optimistic over Hong Kong," she said, saying that "Hong Kong's future will be even brighter as China's economic reforms take hold.

"He reiterated that under the one country, two systems policy and the Basic Law, Hong Kong is not included in China s next Five Year plan, but the stable growth of economic development will undoubtedly benefit Hong Kong," said Ki.

Ki told reporters that Gan said he expected Hong Kong will grow faster than ever post-1997, as continued reform on the mainland creates increased opportunities for construction and other projects, capital investments and imports and exports to flow through Hong Kong.

Mutual Respect For Rule Of Law Emphasized By Premier Li

On the final day of the delegation s visit, the group met with Premier Li Peng and Lu Ping, director of the Hong Kong-Macao Affairs Office.

Ki, describing the group's meeting with Premier Li, said the discussion revolved around the principles of the Basic Law, the concept of "one country, two systems," and the rule of law.

"Premier Li, not unlike the other senior officials with whom we met, said that China is prepared to move forward with Hong Kong, as it always has been, with the Basic Law as the foundation," she said. "He repeated his support for the `one country, two systems' concept, and was direct in his statements regarding China's respect for the continuation of the rule of law in Hong Kong."

"The Basic Law must be respected on all sides," he told us. "This applies to Chinese citizens as well as the citizens of Hong Kong. Just as one example, mainland citizens, under the Basic Law, are not permitted free entry to Hong Kong. To do so would create an untenable problem for an already-crowded Hong Kong. And importantly, this is dealt with in the Basic Law," Premier Li is quoted as saying.

"In this regard, the Chinese Premier said explicitly that China recognized that the assets and investments of international investors must and would be protected under Hong Kong's legal system," said Ki.

Regarding China's future relationship with Hong Kong, Ki said Premier Li expressed the view that Hong Kong and China could not be discussed as if they are entirely separate entities. "He told us that Hong Kong and China are inseparable, and their economic futures closely linked. He said as China grows, Hong Kong will grow right alongside of it. So if you have confidence in the future economic development of China, you must have confidence in the future economic prosperity of Hong Kong," she said.

Passport, Visa, Permanent Residency Plans Clarified by Lu Ping

Meeting with Lu Ping, Director of the Hong Kong-Macao Affairs Office, on the final day of their visit, the delegation discussed at length the Basic Law, and matters regarding passports and permanent residency, all issues of considerable concern to business in Hong Kong.

Lu began the conversation, according to Ki, by saying directly that "China respects the Basic Law." And he went on to say that "the stipulation of the Basic Law is not an expediency to please Hong Kong people, but to maintain the stability and prosperity of Hong Kong."

"Capitalism is the only way to maintain the stability and prosperity of Hong Kong," he told the delegation.

Regarding permanent residency, according to Ki, Lu said clearly that non-Chinese citizens who have ordinarily resided in Hong Kong for a continuous period of seven consecutive years, and take Hong Kong as their permanent residence, can become permanent Hong Kong citizens. "We are negotiating with the British Government about amending the regulations," he told the delegation.

Ki added that Lu also said that Hong Kong residents holding SAR(a) passports would be able to simultaneously retain their certificate of identity (CI). She quoted him as saying, "A general principle is that we hope to provide convenience for Hong Kong people to travel. If this touches on laws of nationality, it will not change. The issue of double nationality is very sensitive in South Asia. But all of this is covered under the Basic Law, and will be enforced under the rule of law, which is important for all to recognize and observe."

Ki quoted Lu as saying "When mainlanders go to Hong Kong, they must observe Hong Kong law. Armies stationed in Hong Kong must observe the Chinese law and Hong Kong law. Chinese institutions stationed in Hong Kong must observe the Hong Kong law. And when Hong Kong people come to China, they must observe the Chinese law."

Cheng and other leaders of major Hong Kong businesses traveled to Beijing as part of a delegation from The Better Hong Kong Foundation. The Foundation was organized in September, 1995 to focus on business and investment issues related to Hong Kong. A fundamental goal of the Foundation is to convey a balanced perspective of Hong Kong to the local and international business communities in the run-up to Hong Kong s return to China in June, 1997.

In addition to Cheng and Ki, members of the Foundation's delegation to Beijing included Li Ka Shing; Ronnie Chan; Chen Din Hwa; Raymond Chien; Sumet Jiaravanon; H.C. Lee; Robert Ng; Dennis Sun; Tsang Hin Chi; and Nellie Fong, chairman of the executive committee of The Better Hong Kong Foundation.

The Trustees are drawn from a wide range of businesses including property development, telecommunications, retail and manufacturing, hotels and entertainment, and infrastructure development. Their combined investment in Hong Kong totals in excess of US$80 billion.

(a) Hong Kong will be a Special Administrative Region (SAR) of China beginning July 1997.

CONTACT: In New York: Ian McCabe, Pat Ford, 212/614-5283

or

The Better Hong Kong Foundation, Hong Kong

Leonie Ki, (852) 2861-2622