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UPDATE 1-Hong Kong leader lays out vision in maiden policy address with tax cuts, subsidised housing

cuts, subsidised housing@ (Adds quotes and details)

HONG KONG, Oct 11 (Reuters) - Hong Kong will trim company profits tax and build more government subsidised flats for struggling families, the city's Chief Executive Carrie Lam said in her maiden policy address on Wednesday, laying out priorities for the next five years.

To bolster Hong Kong's regional competitiveness and help small and medium sized enterprises, Lam said the Asian financial city would cut company profits tax to 8.25 percent from 16.5 percent for the first HK$2 million of earnings.

"In the face of competition from other economies as well as the rise of protectionism in recent years, Hong Kong is facing increasingly grave challenges. We must develop a high value-added and diversified economy," Lam said.

The Hong Kong leader also said she would address the city's astronomical housing prices by seeking to bolster land supply and launch a new subsidised "starter homes" scheme to help families not eligible for cheap-rental public housing. The first phase would provide around 1,000 residential units, she said.

Income inequality is at its highest level in over four decades in the city of 7.3 million people, stoking discontent that has seen large-scale protests in recent years over calls for more affordable housing as well as democracy.

Chinese President Xi Jinping also voiced concern over the city's property market when he visited on July 1.

"Even if our housing policy has broad community support, it takes time to find land for increasing the housing supply," said Lam, Hong Kong's first female leader who took office on July 1.

"The current-term government will think out of the box to facilitate the implementation of various short-term community initiatives to increase the supply of transitional housing, with a view to alleviating the hardship faced by families."

Hong Kong's property market is one of the world's most expensive, with an apartment of less than 200 square feet costing as much as $500,000.

Lam's property initiatives were less than expected and she did not mention the conversion of farmland for residential use, a contentious issue, causing Hong Kong listed property stocks to fall in morning trade after strong gains on Tuesday.

Since taking office Lam has sought to heal social divisions amid growing tensions with China, and to forge a softer and more socially engaged leadership style than her predecessor, the staunchly pro-Beijing Leung Chun-ying.

She added that Hong Kong has the responsibility "to say no to any attempt to threaten our country's (China's) sovereignty, security and development interests."

Britain returned Hong Kong to Chinese rule in 1997 under a one country, two systems formula which guarantees wide-ranging autonomy and judicial independence not seen in mainland China.

But tensions between Hong Kong and China have heightened in recent years amid concern over Beijings interference in the former British colony, sparking large scale pro-democracy protests.

(Additional reporting by Venus Wu, Anne Marie Roantree; Editing by Michael Perry)