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“Meanwhile, the rapid development and progress of Mainland cities will also bring more competition to Hong Kong. With the increasing modernisation of the Mainland’s financial system and the development of other financial centres there, Hong Kong’s comparative advantage in Mainland-related intermediation may narrow. To maintain its long-standing position as an international financial hub, Hong Kong must strengthen and expand its customer base for financial services in the region,” he added.

Mr Tsang says to meet the challenge from increasing competition, Hong Kong must also maintain and promote its role as an international cosmopolitan city while continuing the integration with the Mainland economy, facilitating business activities, encouraging creative ideas and promoting the use of technology. “Global competition is ultimately a competition for talent,” he said. “The Government will continue to invest heavily in education and retraining as well as create more favourable conditions to attract talent from around the world.”

Keeping inflation in check

Inflation is another problem Hong Kong is facing as a result of global conditions. “The building-up of inflationary pressure is mainly due to the rising food and energy prices in the international markets as well as the strong economic expansion over the past four years or so,” Mr Tsang said. “Indeed, this is a global phenomenon, as inflationary pressures are increasing around the world.

“In Hong Kong, which is a market economy, changes in prices are part and parcel of the adjustment mechanism to balance demand and supply. Yet we will do all we can to mitigate the inflationary pressure. For example, we will continue our communications with the Mainland authorities to ensure a stable supply of food for Hong Kong, ensure effective market competition at the import and retail levels so that consumers can enjoy a wider range of product choices at competitive prices, and provide adequate land to meet market demand in order to ease the upward pressure on property rentals and prices. Also important is to increase the productivity of the economy to contain the cost pressure.

“We are particularly concerned with the impact of inflation on the lower-income families and the underprivileged. The various measures announced in the 2008-09 Budget will help alleviate to some extent the impact of inflation on these people and also push down somewhat the inflation rate,” Mr Tsang said.

Boost for construction

In his February Budget Speech, Mr Tsang estimated the Government would spend around $21.8 billion on new infrastructure in the next fiscal year and this, he says, is expected to create about 27,000 construction jobs. “This should help the recovery of the construction industry, which has been rather sluggish for some years.

“More importantly, we have to look beyond 2008-09. Over the next few years, we will vigorously implement various infrastructure projects, including the 10 major projects announced by the Chief Executive in last year’s Policy Address. The construction of these projects will create a lot of job opportunities for construction workers and help improve their livelihoods.