Based on the experience in my own country, Croatia, I would say that we have unfortunately somewhat neglected the development of human capital in the last ten years of transition. b)  Social capital  New literature is trying to explain the complexities of various phenomena by social capital (Collier, 1998, Fukuyama, 2000). It is clear that for growth we need not only physical and human capital, but quality social capital as well. Social capital can be described as features of social organisation, such as norms, trust, networks, etc., that facilitate coordination and cooperation among the group for the mutual benefit of the group. A group can be anything from a household to the nation. In the production process it is an addition to physical capital (machines, tools) and human capital (accumulated knowledge). Social capital can enhance the benefits of both investments in physical and human capital. One may distinguish between government social capital and civil social capital. Government social capital encompasses government institutions that influence people’s ability to cooperate and get mutual benefit out of it. Examples are: the rule of law, enforceability of contracts, civil liberties. Civil  2  The original Latin saying is: Navigare necesse est, vivere non necesse est. BIS Review 43/2000  4  social capital includes: common norms, values, informal groups or networks that influence the ability of people to work together. Both of them resolve, i.e. overcome the collective action problem (the prisoner’s dilemma). Trust, as promoted by social capital, reduces uncertainty and thus reduces transaction costs.

Quite apart from our excellent ecosystem and proven resilience, we have a strong record as the Mainland’s trusted partner in its entry into the global financial system. We have been able to assist in achieving the desired outcomes while ensuring the integrity and stability of the Mainland’s own financial system. Similarly, Hong Kong is a trusted partner for international investors. We offer them access to Mainland markets in the language and rules with which they are familiar. In doing so we help maximize their opportunities while minimising their compliance costs and risks. One exciting aspect of the Connect schemes is the prospect of unleashing the potential of Hong Kong as the world’s leading offshore renminbi business hub. The internationalization of the renminbi and the opening of China’s capital account are interdependent issues. Today’s seminar will focus on Hong Kong’s role in driving offshore RMB business, and the opportunities that come with it. I would simply like to stress the point that Hong Kong has the infrastructure, the expertise, and the markets to perform that role. Before I conclude, let me mention two other opportunities Hong Kong cannot afford to miss: green finance and technology. We intend to be at the forefront of these two trends that will define the future of finance. We are joining hands with local and international financial regulators to ensure that the financial sector plays its part in achieving global net-zero objectives. We are working with the banks to manage their own climate risk as they help the real sector go green.