eddie yue : hong kong ’ s possible role in islamic finance welcome address by mr eddie yue, deputy chief executive of the hong kong monetary authority and executive board chairman of the treasury markets association, at the hong kong showcase on islamic finance, dubai and amman, 11 - 12 may 2008. * * * ladies and gentleman, it is with great pleasure that i welcome you all to the hong kong showcase on islamic finance, presented by members of the financial services industry in hong kong, and jointly organised by the hong kong monetary authority, the hong kong treasury markets association and hong kong trade development council, which is being held over two days in dubai, uae and amman, jordan. i would first like to thank her majesty queen rania al - abdullah of jordan, who is hosting the islamic financial services board ’ s annual summit, the central bank of jordan, and of course the ifsb itself, for graciously agreeing to allow us to organise this event under the auspices of the annual summit. this forum is indeed an excellent opportunity for the regulators, industry practitioners and investors in the gulf region and hong kong to share new perspectives in the rapidly expanding area of islamic finance, which transcends national borders and is fast penetrating global financial markets. today we will be focusing on what hong kong has to offer and where it fits into this changing global financial landscape. what i would like to do in the next ten minutes or so is to give you an overview of the current landscape of islamic finance in hong kong from the perspective of both a financial regulator and a market facilitator, and tell you about how we could help promote this initiative from the hong kong monetary authority ( hkma ) point of view. why does hong kong wish to develop islamic finance? first, allow me to share with you some thoughts in how we see the relevance of hong kong to the development of islamic finance in asia. from its early phase of development in the 1980 ’ s, islamic finance has grown tremendously and undergone a rapid transformation in less than two decades. today, it has gained widespread recognition, not just among investors of the muslim faith, but also among other investors who see islamic finance as a new investment alternative. islamic finance is therefore no longer characterised by its uniqueness, but rather seen as an integral part of the international financial system. this brings remarkable opportunities for hong kong, as a frontrunner in international finance, which possesses key strengths in financial intermediation on an international scale to bring together investors and fund raise

us $ 20 billion to us $ 30 billion equivalent every day. i also note that remarkable developments have been achieved in australia, with recent data suggesting that australia ’ s rmb payments value increased by close to 2. 5 times year on year. more broadly speaking, the rmb is now the seventh most used payment currency according to the society for worldwide interbank financial telecommunication ( swift ), and the ninth most actively traded currency according to the bank for international settlements ( bis ). 4. to me, the extent and pace of the development of offshore rmb business depends on three key factors. the first factor is the relaxation of controls and restrictions by the mainland authorities. the second factor is the availability of the necessary financial market infrastructure, such as clearing and settlement systems. the third factor is the awareness and willingness of corporates and financial institutions, especially banks, to develop rmb business opportunities. 5. since the rmb trade settlement pilot scheme was launched back in july 2009, the mainland authorities have incrementally removed many controls and restrictions on the flow of rmb out of and into the mainland. presently all trade and current account bis central bankers ’ speeches transactions between mainland china and other parts of the world, as well as inward and outward direct investment into and out of china, can be conducted in rmb. moreover, some cross - border portfolio investment flows, such as investments into china ’ s bond and equity markets, can also be made in rmb via the rmb qualified foreign institutional investors ( rqfii ) scheme. 6. more importantly, in april this year the mainland and hong kong authorities announced a milestone project, i. e. the shanghai - hong kong stock connect scheme. the scheme, which is to be launched later this year, will allow hong kong and international investors to invest in shares listed on the shanghai stock exchange through hong kong. at the same time, mainland investors can invest in shares listed on the hong kong stock exchange through shanghai. this unprecedented bridge linking the hong kong and shanghai stock markets will create an additional channel for cross - border portfolio investment flows using rmb. given all these relaxations and the new schemes permitting cross - border flows of rmb, i think there is ample policy headroom for the offshore rmb markets to develop and flourish. at the same time, we have seen the emergence of the necessary financial infrastructure, not just in hong kong but also in many offshore centres, that would facilitate efficient and safe clearing and settlement of rmb