Although the SAR's Basic Law says that there should be legislation to outlaw sedition, treason and subversion, the draft bill annoyed many by giving the police more powers and imposing life sentences for some offenses.

Now Mr Tung says that there is no timetable for the bill to be reintroduced, and that this won't happen until government has gained public support for the terms of a new draft. He said he had notified the Beijing government about the bill's withdrawal.

The Chief Executive also says that economic recovery should be the government's key priority: "I have listened to a lot of opinions; what our citizens care about the most at the moment are the economic matters," Mr. Tung said. There have been strident calls for his resignation in the wake of the July crisis, which also led to the resignation of the security and financial secretaries.

Hong Kong has yet to recover from the combined effect of the Asian financial crisis, a property sector melt-down, and this year's SARS epidemic which damaged tourism. The government is expecting a record budget deficit of HK$70bn (US$9bn) in the current year. Although this is covered ten times over by financial reserves, analysts worry that the government's political weakness may prevent it from taking the difficult measures needed to return the SAR to economic health.