increasing economic, trade and financial integration and increasing interdependence, any regional financial arrangement must be structured with regard to international standards and practices. it would not be appropriate, for example, for a regional institution, if there is to be one, to prescribe medicine, along with financial assistance, that is different from those prescribed by the international monetary fund. it would immediately be seen as a soft window for financial support, thus creating moral hazard problems. i am hopeful that well - structured arrangements will emerge in due course. certainly the climate is right and the momentum is there. 14. perhaps i should take this opportunity to put the recent financial turmoil in asia in a global perspective. first, the world is in very good economic shape. world economic output is estimated by the imf to expand by 4 - 4½ % in 1997 and 1998, the strongest pace in a decade. in the oecd countries, especially in the us, there is solid growth with low inflation, while we are seeing signs of broad - based recovery in europe. only in asia have we seen a slowing of growth, but the growth rates have still been high by world standard and last year japan grew by 3. 6 %, the fastest since the late 1980s. 15. second, because of high global liquidity and low inflation, asset markets around the world are at record levels. capital flows have increased with globalization, and added to record high stock and bond prices. the fact that europe has recently raised interest rates, and the fed is considering whether to pre - emptively raise rates to prevent wage - push inflation, has made the financial markets much more nervous despite the growth environment. this explains why the financial volatility in asia has become global in nature. it is very flattering to know that hong kong can move even the mighty us and european markets, as much as the other way around. 16. third, asian fundamentals, and especially hong kong fundamentals, are strong. but there have been different degrees of strength in asia with respect to the fundamentals. the adjustments in exchange rates of currencies in this region reflect partly the market perception of fundamentals. but as i said recently at the per jacobsson lecture, there is no perfect exchange rate regime. some economists think that a shift from a rigid exchange rate regime to a free float would result in lower interest rates to ease the interest rate pain. however, recent experience in asia has shown that the market demands even higher interest

provides room for our banks to continue lending and providing relief measures to customers during the covid - 19 outbreak. 14. and our capital markets are thriving. hong kong was the world ’ s leading ipo centre last year. although global markets were tested by extreme volatility in the first quarter, our capital markets have continued to function without incident. as several large chinese companies that had listed in the us seek secondary listings in hong kong this year, we should once again achieve a very high ranking in the global ipo league table. 15. none of this happened by luck or by chance. the resilience we see now is the result of sustained efforts over many years. it ’ s the result of building capital and liquidity buffers into the banking system ; and prudently managing the reserves that support the linked exchange rate system. it ’ s the result of enhancing our own – and the banks ’ – operational resilience and business continuity plans. it ’ s the result of communicating effectively with stakeholders to maintain confidence in the financial system. 16. so this quality of resilience is the product of a long term investment in the many factors that make our system strong. abundance of opportunities 17. the second quality of an international financial centre that i want to talk about is its ability to generate opportunities for investors. advanced financial centres like hong kong compete fiercely with each other. we succeed by offering investors opportunities so that they can succeed. that means we need to keep innovating, exploring new frontiers and developing our value proposition. 18. hong kong ’ s advantages in offering opportunities to global investors is mainly down to three macro trends. i believe these will provide the impetus for us to continue growing and outperforming. 19. first of all, financial liberalisation on the mainland creates enormous opportunities for hong kong. we have always been the dominant financial gateway between the mainland and the rest of the world. today, more than half of international investors ’ stock and bond investments on the mainland are made through hong kong. we have also announced a pilot scheme for wealth management connect and have other initiatives under development in the greater bay area. 20. with our unique advantages and strengths – including the common law system and world2 / 4 bis central bankers'speeches class financial regulations and market practices – hong kong will remain the leading portal for international investors seeking opportunities on the mainland. 21. t he second trend that is creating opportunity in – and for – hong kong is fintech development. we