, the rmb clearly has the potential to become a major international currency and to be included, when the international monetary fund will deem it appropriate, in the basket of currencies that determines the value of the special drawing rights ( sdrs ). that said, any currency of a truly global reach needs, amongst others, safe and efficient arrangements and seamless processes to clear and settle transactions in that currency. in the euro area, we have undertaken great efforts to introduce safe and efficient financial market infrastructures for payments and the clearing and settlement of financial instruments. also within china, extensive work has been, and is, underway in this regard. however, while these infrastructures facilitate the safe and efficient handling of transactions within the respective economies, they do not yet provide for effective automated linkages between the two currency areas. therefore, the institutions participating in domestic infrastructures are acting as intermediaries and service providers to corporates and financial actors wishing to transact within and between the two currency areas. various challenges exist in the processing of cross - border transactions. one is the need to have common or interoperable technical standards, a lack of which hamper a fully automated and fast processing of transactions, leading to higher failure rates and costs. in this regard, we appreciate the efforts undertaken in china to introduce state - of - the - art standards such as iso20022, as well as those by swift to increase fully - automated processing, for example by developing a standardised dictionary for the chinese commercial code ( ccc ). the setting up of rmb clearing arrangements like the one introduced here in frankfurt – which i understand is starting operations today - and those existing or planned for other centres in europe and other parts of the world, will play an important role in facilitating crossborder payments, as well as closer integration and relations between economies. i am convinced that the continuous development of more efficient payment and clearing arrangements will benefit corporates and financial actors, both in the euro area and in china. to conclude, we should not forget that, together with many opportunities, the integration of a new major currency in the global economy also brings risks, as it allows shocks to propagate more easily across borders. to minimise risks, such a process therefore must be monitored carefully and complemented by close cooperation between authorities in china and abroad. even more important however, is to strengthen the chinese financial sector, in particular banks, so that it is sufficiently resilient to cope with the new

point is that market interventions also involve costs for these countries. for central banks, growing dollar reserves also mean a growing risk of losses should the us dollar depreciate. 7 their incentive to give more consideration to other currencies in the portfolio might become stronger. however, it also seems doubtful whether the avoidance of foreign exchange losses motivates central banks ’ actions. another aspect of “ bretton woods ii ” is the growing importance of dollar reserves in the intervening central banks ’ balance sheets for their countries ’ monetary policy. many of the asian central banks have sterilised the bulk of their reserve purchases. 8 besides costs resulting from possible changes in the exchange rate, these sterilisation costs also have to be borne in mind. in actual fact, in the past few years there has been a certain easing of the alignment of some asian currencies ’ exchange rates with the dollar. in march 2004, japan discontinued its currency market interventions. since then, the japanese foreign exchange reserves have been nearly unchanged. the authorities in korea, taiwan and singapore also were already allowing fairly large fluctuations of their currencies in the course of 2004. bernanke, b s ( 2005 ), loc cit. see higgins, m / klitgaard, t ( 2004 ), reserve accumulation : implications for global capital flows and finanicial marktes, federal reserve bank of new york, current issues, vol 10, no 10, september / october 2004. see dooley, m p / folkerts - landau, d / garber, p ( 2003 ), an essay on the revived bretton woods system, nber working paper 9971. see roubini, n / setser, b ( 2004 ), the us as a net debtor : the sustainability of the us external imbalances, stern school of business, nyu und university college, oxford. see higgins, m / klitgaard, t ( 2004 ), loc cit. the build - up of currency reserves in those countries has now lost momentum. last year in july, the transition to a new exchange rate regime was initiated in china. overall, this means that some modification of the exchange rate arrangements has now been put in place. this transformation is also reflected in the us financial account. in 2005, unlike earlier years, currency purchases by public investors no longer made the largest contribution to financing. the idea of a “ bretton woods ii ” system has therefore already become somewhat less