. liquidity, product and infrastructure, which are essential to building a vibrant rmb offshore market in hong kong, i should add that supervisory collaboration is also important in this gradual opening - up process. many of the initiatives to promote the international use of rmb will involve the opening up of the mainland ’ s capital accounts. this must be done in a gradual and risk - controlled manner, which is why you often see quota and eligibility criteria in the initial stage of the connect schemes. this kind of risk - control features requires the close collaboration between the hkma and our mainland counterparts. through such collaboration, we seek to ensure that hong kong is a safe and reliable platform to take forward these new cross - boundary initiatives. 20. some of the ideas that i have just mentioned will take time to materialise. some may need a testing ground to pilot before being scaled up. on this, the guangdong - hong kong - macao greater bay area or qianhai could function as pilot zones in the mainland to test new crossboundary initiatives with hong kong. the wealth management connect is a case in point. conclusion 21. ladies and gentlemen, what i have presented to you is a very brief summary of our thoughts on the role of hong kong in promoting the international use of rmb, but even that, i am sure you will agree, is already quite a menu. and we are already actively exploring some of these policy initiatives with our mainland counterparts. but we cannot do it all on our own. while we need to create the necessary policy headroom, the market should be the one driving the process of rmb internationalisation. the active participation of market players is critical. i would therefore warmly welcome views and suggestions from members of tma and its subcommittees on ways to enhance the liquidity, to expand the product diversity and to build an efficient infrastructure in order that we can further develop the role of the hong kong markets in the process of the internationalisation of the rmb. 22. with its 76 institutional members and over 3, 000 individual members, the tma has been providing broad - based support to foster market development in hong kong. we believe the hkma and the tma ’ s relationship can also be a mutually beneficial one. as you can probably tell by now, the internationalisation of the rmb poses many unique opportunities for hong kong and it is time to do our part. we continue to look to the tma ’ s active participation in this journey for hong kong

##onclusive. the current financial crisis brings home the message that integration with the global financial market could expose a country to global financial turbulence even when its own financial sector and real economy are fundamentally sound. despite the recent turbulence and the spillover effects of capital flows, we should not, in my view, lose sight of the many benefits of an open capital account. free flows of capital across borders can make the domestic financial market deeper and wider, increase liquidity, and facilitate price discovery, thus improving efficiency of resource allocation. at the same time, diversification by investing overseas can help raise investment returns for households, which would in turn help promote private consumption and support sustainable growth. for emerging markets in particular, participation of foreign financial institutions can speed up the kaminsky, g. l., c. m. reinhart and c. a. vegh ( 2004 ), " when it rains, it pours : procyclical capital flows and macroeconomic policies ", nber working paper, 10708. learning process and facilitate the adoption of best international practices by the financial sector. therefore, while a more liberal regime for capital flows could at times bring about negative impacts, the relevant response should not be to keep the capital account closed forever, but to find ways of effectively managing the potential risks. international experiences have provided some broad suggestions on how such risks could be managed. foremost is the importance of appropriate sequencing between liberalising the capital account and other domestic reforms. development of financial institutions and markets, enhanced macroeconomic stability, and proper risk management by banks and enterprises would help to increase the resilience of the domestic entities in dealing with volatile capital flows. in addition, prudential regulation and supervisory framework need to be established, in order to prevent excessive risk - taking by domestic financial institutions. such framework needs to be accompanied by adequate accounting, auditing and disclosure standards, to improve market transparency and enhance supervisory effectiveness. turning to mainland china's experience, the liberalisation of capital account has been selective. inflows of foreign direct investment have long been encouraged, which has contributed significantly to china's robust economic growth. in more recent years, steps have been taken by the authorities to allow greater portfolio flows. in particular, the qualified foreign institutional investors ( qfii ) schemes have enabled foreign investors to access the domestic financial market, while under the qualified domestic institutional investors ( qdii ) schemes, financial institutions can, upon approval, invest overseas on behalf of domestic