, with the ratio of debt to gdp rising significantly to its current level of around 260 per cent ( graph 9 ). http : / / www. rba. gov. au / speeches / 2018 / sp - gov - 2018 - 05 - 23. html 10 / 20 5 / 25 / 2018 australia's deepening economic relationship with china : opportunities and risks | speeches | rba graph 9 this increase in the debt ratio over the past decade has been larger than in any other major economy. this can be seen in this next chart, which shows the increase in this ratio since 2009 for a range of countries and the current level of that ratio ( graph 10 ). china clearly stands out. the stock of credit outstanding in china, relative to the size of the economy, is now unusually high by emerging market standards. and this ratio is already higher than in many advanced economies. so what has happened in china is quite different to the normal pattern. http : / / www. rba. gov. au / speeches / 2018 / sp - gov - 2018 - 05 - 23. html 11 / 20 5 / 25 / 2018 australia's deepening economic relationship with china : opportunities and risks | speeches | rba graph 10 over the period of rapid credit expansion, there was a series of reforms to modernise the chinese financial system. interest rate controls have been relaxed, although there is still ‘ guidance ’. a deposit insurance system has been introduced and the regulatory system has been strengthened. the capital markets are playing a more prominent role in the financial system. the large state - owned banks are now listed on stock exchanges in china and hong kong. it is also now somewhat easier for private firms to obtain equity finance. controls on capital flows have also been relaxed somewhat over the last decade. it is worth recognising that, taken together, these are significant changes. a decade ago, many outside observers were sceptical that the chinese authorities would undertake reforms across many of these fronts. yet they have made significant progress. despite this progress, there is still much to be done before the chinese financial systems looks like financial systems we see in the advanced economies. one area where the chinese financial system is moving towards a more modern form is in households'access to mortgage finance. prior to the late 1990s, mortgages were essentially nonexistent. but in recent years, households have progressively enjoyed increased access to finance, which has helped lift the share of consumption in national income. at the

cross - border portfolio investments within asia is relatively small, it has already increased to 28 percent of total assets holdings in 2011 compared with 21 percent in 2001. another important development that has contributed to greater regional financial integration is the increasing role of islamic finance in the international financial system. in its early stages of development, islamic finance was highly domestic - centric in its orientation. this recent decade has seen the rapid internationalisation of islamic finance resulting in significant growth in cross border financial flows. the development of islamic financial markets, in particular, the sukuk market, the progressive financial sector liberalisation, and the establishment of international arrangements and institutions to safeguard financial stability, cumulatively have contributed to enhance the international dimension of the industry. there are now more than 600 islamic financial institutions operating in more than 75 countries. given that islamic financial transactions require an underlying economic transaction, it is a form of financial intermediation that is well anchored to serve the real economy. with its internationalisation, it has become an increasingly more important channel for the efficient allocation of financial resources across borders and for the diversification of risks. this new international dimension of islamic finance has facilitated stronger financial ties between asia and the middle east. the sukuk market in particular has become an important avenue for international fund raising and investment activities that generate significant cross border flows. while the efforts to put in place these pre - conditions will continue, equally important is the role of the private sector in driving the asian regional financial integration agenda, particularly in building the institutional capability to effectively intermediate funds in the region. while foreign presence throughout our region facilitates this process, it needs to be complemented by strong domestic regional intermediaries whose operations would be more inclusive and thus increase the potential for balanced growth in our region. asia has demonstrated its resilience to the many shocks from the international financial markets and the global economy during this recent global financial crisis. as highly open bis central bankers ’ speeches economies, most economies in asia have been highly affected by these developments. stronger domestic demand, greater intra - regional trade and investment, reinforced by resilient financial systems and strong macroeconomic fundamentals, have supported the economic performance of our region. there have been tremendous payoffs for the region from the decade long of financial reforms, institutional building and development of financial infrastructure. despite the highly challenging environment of slower trade and volatile financial markets, financial intermediation in asia has continued uninterrupted and financial markets, while more volatile, have remained orderly.