HONG KONG - CHIEF Executive Donald Tsang began a fresh five-year term yesterday calling on the city to brace itself for fiercer competition not just 'with neighbouring cities, but with cities around the world'.

At the swearing-in of his new Cabinet, the 62-year-old leader told an audience that included Chinese President Hu Jintao that Hong Kong can put its famed resilience to more good use.

'Hong Kong is not the biggest city in China, but it can be the best,' said Mr Tsang, who aspires to turn the city into a financial capital on a par with New York and London. 'Over the next five years, Hong Kong needs to transform itself.'

Hong Kong's financial sector will be expanded, and infrastructure investment boosted to create jobs for 'grassroots workers', he said.

More public views will be heard, while the city will also strive to improve its environment and develop a 'caring culture'.

Hong Kong has been criticised for its bad pollution and a widening wealth gap. The city also faces tough competition from its mainland counterparts, even though Beijing has firmly backed Hong Kong as a financial hub in China's latest five-year economic blueprint.

For one, Shanghai and Shenzhen stock markets are continuously competing with Hong Kong for new Chinese listings. Their combined market capitalisation in April this year reached US$1.81 trillion (S$2.77 trillion), exceeding Hong Kong's for the first time.

Shanghai's port has also overtaken Hong Kong's this year to be the world's second-busiest behind Singapore. Another in Shenzhen is expected to catch up next year.

Still, it could be too early to tell if Hong Kong would be marginalised. Barrister-lawmaker Alan Leong told Canton Fair Organisation: 'There is freedom of information here that cannot be found in Chinese cities and that is important for any industry...Hong Kong must maintain and enhance this edge.'