The Chief Executive of Hong Kong, Tung Chee-hwa, has said that the territory's economic recovery depends on a good business environment.

He was responding to criticisms by an influential local tycoon, Li Ka-shing, who said political instability in Hong Kong was creating a hostile environment for investors.

Mr Li announced on Tuesday that he was scrapping a planned investment of over a billion dollars because of the territory's political atmosphere.

His remarks were widely seen as referring to democratic legislators who have been critical of his company's behaviour during the economic crisis.

The BBC correspondent in Hong Kong says Mr Li's remarks, which were followed by a fall in local share prices, were one of the worst blows to business confidence since the territory returned to Chinese rule in 1997.