Mr. Tung Chee Hwa,

Ladies and Gentlemen,

My warmest thanks to Mr. Tung Chee Hwa for the invitation to join you this evening.

I very much welcome this opportunity to meet friends from the China-United States Exchange Foundation.

This is my first visit to Hong Kong in 14 years. I was last here in 1997 during Hong Kong’s handover.

I witnessed that significant moment in Hong Kong’s history.

Also, I was honoured to be present at Mr. Tung Chee Hwa’s inauguration as the SAR’s first Chief Executive.

From what I can see, Hong Kong has made an extraordinary journey during the past 14 years.

Just as the lyrics of the pop song Pearl of the East goes -- Hong Kong is still every bit as charming and thriving as it has ever been.

In fact, if anything, Hong Kong has become even more prosperous. I believe a driver of this success has been ever closer integration with the mainland.

Another important factor is the global image of Hong Kong. This part of China has won a reputation as the world’s freest and most competitive economy.

These 14 years have also been a time of unparalleled growth in China-UK relations.

Under the Labour government from 1997 to 2010, China-UK relations were taken to a new level.

The two countries launched a wide range of cooperation and dialogue mechanisms. These include:

· Our Premiers’ annual meeting.

· The Economic and Financial Dialogue.

· And the Strategic Dialogue.

Since the UK coalition government took office last year, these positive trends have continued.

Both our countries are committed to building a stronger partnership. Our Premiers have exchanged official visits. And other dialogues are yielding positive results.

Now, Sino-UK trade is worth nearly 60 billion US dollars per year. We hope to raise it to 100 billion US dollars by 2015.

On the investment side, Britain remains the leading EU investor in China. At the same time, Chinese capital is flowing faster into Britain.

Education provides another area where immense potential for collaboration is recognised.

As I speak, 120,000 Chinese are studying in Britain. This is far higher than any EU country.

At the same time, a surge in Mandarin learning has swept across Britain.

Britain now hosts 17 Confucius Institutes. This is more than any country in Europe. I can reveal to you that many more UK universities are lining up to set up Confucius Institutes with Chinese partners.

I expect this positive progress to continue. The reason is that from now to the second half of next year China and Britain will celebrate four major events.

First, in a very short while, a pair of giant pandas will settle into their new home at the Edinburgh Zoo.

Second, next March China and Britain will celebrate 40 years of full diplomatic relations.

Third, in April China will participate in the London Book Fair as the Guest of Honour.

Fourth, London will host the 2012 Olympics four years after Beijing.

We have great confidence that all these events will provide important opportunities to strengthen Sino-UK relations.

Now let me turn to the China-Europe relationship.

I know this has been in the media spotlight for quite some time. There is close attention given the continuing financial crisis in Europe. Many are asking - where is this relationship heading?

In answering this question, I will focus on three points.

First, cooperation overrides differences.

China is the largest developing country and the European Union is the biggest bloc of developed countries.

There is no geopolitical or fundamental conflict of interests between China and Europe.

Over the recent decades, cooperation has been the consistent theme of this relationship. We are now each other’s largest trading partner.

The EU is China’s largest export market and number one investment destination.

China is the EU’s second largest export market.

In the context of these strong ties, it is clear we may not agree on everything. This is to be expected given our different histories, cultures, social systems and values.

Managing such differences takes patience and growing understanding.

Just as a principle of philosophy reveals: competing forces provide impetus for things to move forward.

Second, opportunities outweigh challenges.

From our perspective, the Sino-EU relationship faces a number of challenges.

For example, the EU is yet to see China as an equal partner. Some across the EU are not comfortable with China’s fast rise.

In building China-EU trust there are two other matters holding back progress.

· The EU has not yet recognised China’s full market economy status.

· And its outdated arms embargo on China is still in place.

Despite these two obstacles I believe that both China and Europe understand the vast opportunities of our relationship.

China is upgrading its growth model and boosting internal demand and import. Britain and other EU members welcome Chinese investment and are opening up their markets. All this offers conditions for stronger Sino-EU cooperation.

Meanwhile, our cultural exchanges and people-to-people contacts are growing. This contributes to a wider and deeper understanding of China.

Third, a brighter future is within sight despite short-term tests.

Recently the financial and debt crises in Europe have spread beyond its borders. They have brought uncertainties to China-Europe relations.

The European press has been full of comment asking if China will come to Europe’s rescue. There are mixed views about China’s role. Some call for a Chinese bailout, others are nervous about its implications.

China on the other hand has maintained a cool head and clear conscience. We have all along made it clear that solving the debt crisis is first and foremost a European responsibility. We are confident that Europe has the wisdom and capability to tide over this crisis.

China is also a supporter of the joint EU-IMF rescue effort. We are committed to work with Europe and other countries in the spirit of partnership to bring stability to the international financial markets and facilitate global recovery and growth. We are convinced that as Europe emerges from the crisis more closely integrated, so will there be further momentum for the China-Europe partnership.

We have similar missions and objectives. You at the China-US Exchange Foundation are dedicated to build understanding across the Pacific Ocean, and we are working for closer communication and cooperation between China and the UK, and China and Europe. Our shared objective of friendship, trust and partnership will only be won through more exchanges and wider cooperation. This is the only sure way to creating a bright future together.

Thank you!