Chairman C.C. Tung, The Honourable Mrs. Anson Chan, Director Jiang Enzhu, Ladies and Gentlemen,

It is a great honour to be here tonight to celebrate the 140th Anniversary of the Hong Kong General Chamber of Commerce with business and community leaders. The Chamber spans three centuries, leading the business community to outstanding achievements and making a major contribution to Hong Kong's overall success. Please accept my heartiest congratulations. A S Watson, now a subsidiary of Hutchison Whampoa, joined the Chamber as long ago as 1915, and we are very honoured to be part of this success story.

Over the years, Hong Kong has undergone three major structural changes. From an entrepot to a manufacturing base. Then came the blossoming of the property market followed by an economy driven by information technology and financial services. We have enjoyed decades of growth powered by hard work and sheer determination buoyed by a robust western economy and an ever-growing China. Through all the crises and financial turmoils which we have weathered before, perhaps the greatest gain we have earned is our sense of confidence. However, under the pressures of globalization, both our economic and social structures are undergoing a fundamental change. A knowledge-based economy inevitably sees some people better off than the majority. Many people see their lives, their investments, their jobs, as being less and less under their own control. Issues such as income disparity, social polarization and the changing nature of work and life are very unsettling. To steer a right course in such an environment requires an innovative and multi-dimensional approach towards political, social, and economic concerns. It also entails a new test of our established values. How to channel the forces of change is the challenge facing us all. We, in government, the legislature and the private sector, must bear in mind that the decisions we make, no matter how noble or justifiable, could have a disastrous and irreparable impact on others if we do not pay attention to the practical consequences of our action.

We are facing challenges on many fronts, yet, in many ways we are in a more advantageous position than others. Over 100 years of trade and commerce have built us a cushion of reserves that gives us a bit more time; and resources that, if used correctly, can create more choices; a developing China that offers us more access; and opportunities to reengineer competitiveness in our export, production and commercial activities. We have a better understanding of the world, together with sophisticated legal and information systems that equip us to compete with foreign companies. A well-established financial system that makes us the number one capital market in Asia. A tradition that nurtures tolerance as well as rewarding competence. All these together will propel our community towards prosperity and stability. However, if we are to maintain our advantages and to defend our proud past, there are several issues that we have to consider seriously:

First. The quality of education. This is now a global concern. Our students must develop a global perspective and strengthen their analytical skills. They must be trained in the cross-disciplines necessary to face constantly shifting demands. The northward-bound movement of our more labour intensive industries accentuates the problems of mis-matching skill sets. Take a look at Japan. Their education system placed important emphasis on training high quality students from primary school onwards. The standard of their workers is also very high, and this may explain why they have a smaller income gap when compared to many other countries.

Second. Our high production costs are undermining our global competitiveness. Our production costs are second only to Japan in Asia. Although figures indicate that many multi-national corporations continue to set up regional headquarters in Hong Kong, some have relocated elsewhere. A lot of local companies have also moved backroom operations outside of Hong Kong. It is of the utmost importance to devise a strategy to enhance our competitive advantages. China's entry into the WTO presents a "gold mine" of opportunities for us. We know China, we also know the world market. The immense growth of China's economy together with our skills in the capital and financial markets will create boundless opportunities. As you may be aware, our group, under my chairmanship, is firmly rooted in Hong Kong, but ten years ago we took a very significant step to diversify into the Mainland and overseas. Our investment portfolio now spans many mainland cities and 28 countries around the world. They all form part of our solid foundation and provide a steady source of income for our group.

Third. We must sharpen our sense of critical urgency, even if this makes us ill at ease. Long periods of sustained high growth and wealth have made us bloated and complacent. We must be aware of others' diversity and advantages which create flexibility and growth, otherwise we will only stagnate. While this globalization process began 10 to 20 years ago, it may be that our focus on reunification has distracted us from other priorities such as implementing strategies to handle pragmatically the effects of the economic transformation. Mainland cities such as Shanghai, Guangzhou, and Shenzhen have grown rapidly in recent years. We should take this opportunity to ride on the wave of their successful growth in order to enhance further our own strengths.

Fourth. Hong Kong has to open its doors to highly skilled workers from the Mainland and overseas. Although in the short term, the impact on local morale may be painful, yet, as the economy enters an upward cycle, there will be better employment opportunities for all. In the early 1990's, Israel had only 60,000 engineers, insufficient for the development of its advanced industries. With 800,000 Jewish immigrants from Russia, the number of engineers increased by 200,000. This did not create tension; it powered their economy. Maybe this can serve as an example for us. Our Group has over 100,000 colleagues around the world and this number is increasing rapidly. Our overseas employees account for over half of our total workforce. We value talent at home and from all over the world. Our colleagues work together in harmony, creating a strong and growing business.

As we enter the 21st century, we are entering an era of global economic revolution. Wise and objective reflection on how to adapt to the changing environment is necessary. Even though our views may often differ, we all share a deep affection for this place. We must reflect on how we can effectively pursue progress and prosperity with integrity in order to build a better and stronger Hong Kong, this place which 7 million of us call home. Thank you very much.