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Governor: The main reason why I think it has been accomplished is that we have pursued free-market liberal economic policies faithfully for 30 or 40 years. One of the things I quoted from yesterday was the Report of the International Monetary Fund. Now they are pretty beady-eyed observers of the world economy and they don't hand out prizes for economic management easily. They have once again given the management of the Hong Kong economy two thumbs-up. I think one of the things we have managed to do is to avoid doing too much. We don't try to second-guess business, we don't intervene in the marketplace, and I think a result of that is that Hong Kong's natural entrepreneurialism and natural vigour and natural hard work have achieved the sort of results which you read about in Adam Smith or Milton Freidman or in other classical textbooks.

There is just one other thing I would say. I think crucial to the operation of a successful market economy is the rule of law and is a clean civil service and we have had both of them as well, and I very much hope that we will continue to have them after 1997.

Presenter: Thank you. Does that provide some ammunition for when people ask you that question, sir?

Question: No, I think people say, "Well, it can't actually be that simple, it can't be that straightforward, there must be more to it."

Governor: Well there are other factors which have helped as well. We are in the part of the world which is growing most rapidly. We have been at the gateway of China while China has been opening up to the world in an astonishingly successful way. Those have also been factors in Hong Kong's economic success. But I do think it is fair to say that Hong Kong is as good a working model as you could find anywhere of liberal economics, it reads like a textbook of how to do these things.

It is not to say we don't have some problems but when I tell people from Europe or North America that we spend less than 20 per cent of our overall income, of our GDP, in public spending, when I tell them that 60 per cent of the workforce don't pay any salaries tax and that the top rate of tax is 15 per cent which is only paid by two per cent, when I tell them about our health statistics and the amount of extra money we have been able to put into welfare programmes at the same time as we have increased our fiscal reserves, they look at me as if I am making it up.

Question (in Chinese): You are my most respected Governor and we are most grateful to you, and we are also grateful to all the governors that came before you who have helped us through difficult times, and this is the last time I am going to talk to you. Yesterday you delivered your policy address. It was a very good policy address and we don't like those people who are whistle-blowers, who are informants who make trouble, and in fact we can ignore these people, we have had them with us for a long time. Now you will be leaving us; now the longer you stay, the more reassured we

are.