The financial turmoil triggered by the credit crunch in the United States has not caused structural damage to Hong Kong's financial system, Financial Secretary John Tsang said yesterday.

Speaking at a forum on economic cooperation between the mainland, Hong Kong and Taiwan, Tsang noted the impact of the crisis is deepening.

"The financial market in Hong Kong has a comprehensive regulatory framework, fulfilling the traditional function of capital injection into the economy. The financial crisis has not caused structural damage to our financial system so far," he said.

But Tsang expected that the crisis will create uncertainty and an economic downturn.

On a brighter note, Tsang pointed out that the strengthening cross-Strait relationship will create opportunities for Hong Kong, and expected economic cooperation between Hong Kong and Taiwan to intensify.

Speaking at the same forum, Morgan Stanley Greater China chief economist Wang Qing said he expected the economic growth of China to be between 9.5 and 9.8 percent this year, and move downward to 8.2 percent next year.

Wang said the financial crisis will affect the mainland's exports and investment in export trading, which will cause an impact on Hong Kong's re-export trade.

But he added that the central government has a strong policy to handle the crisis, adding that the debt level of the government is low.

He said the central government is able to sustain economic growth with fiscal measures, such as cutting interest rates.

China had recorded an economic growth of less than 8 percent during the Asian financial crisis.

"The Chinese government and economy are a lot stronger compared to a decade ago. The impact of the current crisis will not be as worse as the Asian financial crisis," he said.

Wang said the impact on Hong Kong will be more significant, and suggested the SAR strengthen cooperation with the mainland and Taiwan.

Chinese Academy of Social Sciences Institute of Quantitative Economics director Wang Tongsan expected the mainland's gross domestic product (GDP) growth for the fourth quarter would be around 9 percent as a result of the American economic downturn.

University of Hong Kong deputy vice-chancellor Wong Yue-chim said both Hong Kong and Taiwan could make contributions to the nation's development and opening up.

National Taiwan University economics professor Hsu Chen-min suggested that mainland and Taiwan enter into an arrangement similar to the Closer Economic Partnership Arrangement with Hong Kong.

(HK Edition 10/30/2008 page1)