If this financial crisis has taught us one thing, it is that we are all in this together, and the only way we are going to emerge from the current crisis is through co-operation and through mutual support. So today, I would like to share with you some of the measures that we have taken in Hong Kong to minimise the fallout from the current difficulties.

As a small and externally oriented economy, Hong Kong is particularly vulnerable to the fallout of a crisis such as the one that we are facing. Economic data released in the past few months has constantly reminded us just how deep the global economic crisis is, and the subsequent effect it has had on our economy.

In the first quarter this year, Hong Kong's economy contracted 7.8% year-on-year. Exports of goods fell by about 23% during the same period, which is the worst performance for 55 years, perhaps since we started collecting data.

Given these bleaker than expected figures, we revised downwards our full-year GDP forecast for 2009 from minus 2-3%, to minus 5.5 to 6.5%. The magnitude of this contraction is matched only by the recession that followed the Asian Financial Crisis about a decade ago.

In the face of such an unprecedented economic downturn, we have introduced targeted and timely measures to stimulate the economy, relieve the burden on the people, and to assist the needy among our population.

$87b+ in stimulus measures

Since my first Budget in 2007, the Government has announced stimulus measures worth about $70 billion. The worse-than-expected economic data in the first quarter prompted us to unveil another round of stimulus measures that will bring our total relief package to $87 billion. This is equivalent to about 5.2% of our GDP, which is about double the average of the stimulus packages introduced by the G20 economies.

These measures, however, do not include the $100 billion in loan guarantees that we have promised to businesses to ease the credit squeeze. Nor does the total include additional spending on capital works projects this year.

As market confidence and liquidity is key to financial stability, we announced also a 100% bank deposit guarantee in mid-2008, and we provided access to capital to those banks that required it to ensure liquidity in the banking system. So far none of our banks have asked for that capital liquidity facility.

To relieve the hardship of the people, we have provided financial assistance to homeowners, low-income families and the elderly. We also announced a tax rebate. Such measures will, we hope, also help to boost local consumption.

We have also launched initiatives to promote the development of different sectors, such as research and development, tourism, construction and green industries. We have provided loan guarantee to SMEs, as I have mentioned earlier, to help them get some much-needed capital to work through these difficult times.

Creating jobs and training opportunities for people of all ages are high on our agenda. Apart from measures to help the private sector, which in turn can have a positive effect on employment, we have earmarked resources to provide short-term jobs, training positions as well as internships for young graduates who will soon graduate from their respective schools.

We have also provided financial aid to help students and working people to better equip themselves in preparation for recovery. We are pleased to see these measures have had a positive impact, as evidenced by the stabilisation of the unemployment rate at 5.3% in April this year.

Another interesting comparison is that during the first six months of the Asian financial crisis about a decade ago, we lost about 100,000 jobs, but on this occasion, we have lost only about 30,000 jobs during the first six-month period starting with this crisis. I think this confirms the effectiveness of what we have done so far.

So, we remain hopeful that these stimulus measures will help steer our economy back to positive growth. However, apart from these immediate relief measures, we have not lost sight of the long-term development of our economy, and how to realise our full potential as an international financial centre.

We are an international financial centre in Asia, in the Asian time zone specifically, strategically located between the trading days of London and New York. We are also the financial gateway to the Mainland, and we have a special role to play in the internationalisation of the Mainland financial markets.

Last month, we signed a new supplement to the Closer Economic Partnership Arrangement, or what we call CEPA, which is our free trade agreement with the Mainland. Since it was introduced in 2003, the CEPA has been an important driver of enhanced access to the Mainland market for Hong Kong companies.

Importantly, companies based in Hong Kong - and I mean all companies based in Hong Kong - enjoy the benefits of this free trade agreement, irrespective of their country of origin. This makes Hong Kong a unique gateway for overseas companies to the enormous Mainland market, not to mention our other advantages such as world-class infrastructure, a tried and trusted legal system, a clean and efficient civil service and a free flow of capital, information and ideas.

No doubt, all of these advantages combined is a major reason why we have more than 140 Korean companies based in Hong Kong.

One special measure in the latest CEPA supplement is the proposal to establish an "open-end index-tracking exchange-traded fund" on the Mainland. This would be backed by a basket of Hong Kong-listed stocks, and would be an important channel for Mainland investors to invest in Hong Kong equities.

Other new initiatives in the supplement make it easier for banks to expand their services on the Mainland and enable local securities companies to participate in the development of the securities market across the boundary.

Hong Kong is also the only offshore banking centre for renminbi business. Since 2004, renminbi business in Hong Kong has expanded considerably. About 40 banks have taken in deposits amounting to about US$8 billion.

In April, the Central Government announced it would relax restrictions and quotas for renminbi bond issues, to include more commercial institutions and increase the amount of funds to be raised.

Also in April, the Central Government gave the green light to use renminbi to settle international trade. Given our experience with the renminbi, we aim to be the first place outside the Mainland to start settling trade in renminbi.

Last year, the volume of trade between Hong Kong and the Mainland of China amounted to about US$360 billion. Although we do not know exactly how much of this business would be settled in renminbi, the figures show the enormous potential of this policy development for our financial services sector.

Our economic integration with the Mainland is not solely based on financial services. Earlier this year, the Central Government announced a new framework to establish the Pearl River Delta Region as one of the most competitive regions in the world by 2020.

The framework supports greater co-operation between the Special Administrative Regions of Hong Kong and Macau and Guangdong Province. All key sectors are covered under the framework, including financial services, trade, shipping, logistics and high value-added services. Such co-operation will provide synergy and bring out further the enormous economic potential of Hong Kong and nearby regions.

New growth engines identified

We are also keen to look for new engines for future economic growth. The Chief Executive established a task force on cconomic challenges to examine the current economic crisis and to look for new economic drivers. The task force's final report was released earlier this week.

Besides the four pillar industries of finance, tourism, professional services and logistics that have served Hong Kong well at present, we are exploring opportunities to expand into six new areas in which we enjoy clear advantages.

They are: testing and certification; medical services; innovation and technology; cultural and creative industries; environmental industry; and educational services. We are taking a close look at how we can help these sectors grow and prosper even more.

I have outlined briefly the measures we have taken to counter the economic downturn and measures to inject new energy into our economy. While there is no panacea for economic recovery, no one-size-fits-all type of solution for all concerned, being flexible, forward-looking and swift to action will be essential prerequisites to combat the crisis confronting any economy.

In this regard, I am confident that Hong Kong is now on the right path - a path towards recovery and sustainable economic growth in the future.

Financial Secretary John Tsang gave this address at the Maeil Business Newspaper "World Knowledge Forum in Hong Kong 2009".