##ncies. of course, if the proceeds are to be used on the mainland, the moving of funds into mainland china will have to meet the requirements there. by the same token, banks can now also offer rmb financing to their clients, including enterprises which conduct direct investments under the pilot scheme for the settlement of odi in rmb introduced in january this year. as the pool of offshore rmb funds in hong kong continues to grow, there will be huge opportunities for financial institutions to take part in rmb financing as well as in the origination, distribution, investment and trading of rmb bonds. the second dimension is rmb trade settlement. the rmb trade settlement pilot scheme was introduced in july 2009. the initial scope of the scheme was rather limited. but in less than a year, the pilot scheme was expanded to cover enterprises in 20 provinces and cities on the mainland and their trade transactions with any parts of the world can now be settled in rmb. the expanded scope has led to a rapid growth in the transaction volume of rmb trade settlement in hong kong, which was increased from a monthly average of 4. 5 billion yuan in the first half of 2010, to more than 87 billion yuan in the fourth quarter, representing an almost twenty - fold increase during the period. to date, hong kong accounts for about 75 % of mainland ’ s rmb trade settlement. this clearly demonstrates the strong preference of market players for making use of hong kong ’ s platform for rmb trade settlement. the highly efficient and reliable rmb real time gross settlement ( rtgs ) system in hong kong has played a significant role here. we are the first and so far the only place outside mainland china that has developed a full - fledged rmb rtgs system, enabling us to handle the settlement of cross - border trade between the mainland and other economies in a safe and efficient manner. china is one of the biggest trading nations in the world. the potential for further increases in rmb trade settlement is considerable given that the current volume only accounts for a small fraction of total trade between china and the rest of the world. rmb trade settlement proceeds will represent an important and sustainable source of growth in offshore rmb funds in hong kong. the third dimension is rmb wealth management business. the rmb wealth management business in hong kong took off last year after the rmb clearing agreement was revised in july 2010. the rmb clearing agreement lays down the framework for rmb business in hong kong. i will

years. for the first time in many years, inflation figures of the developing countries are in two digit levels. in this period central banks have adopted different approaches for fighting inflation. one reason of this divergence is the difference between the objectives of central banks. for example, the federal reserve bank of the united states, with ultimate goals of price stability, financial stability and full employment, lowered interest rates by 325 basis points between september 2007 and june 2008 due to severe problems in the financial system. the european central bank, on the other hand, has followed a more hawkish attitude and focused on attaining its primary objective, which is price stability. the disparity between the consumption patterns is another factor causing divergence in monetary policies. in comparison to the industrialized world, food expenditures in developing countries constitute a larger share in the basket of consumer prices. that is why increases in food prices typically lead to higher increases in the inflation rates of developing countries. this is one of the reasons why central banks of developing countries focus more on price stability and display a tighter monetary policy stance in recent months. to put it in figures, since mid - 2007, policy rates in sixteen major developing countries have increased by 110 basis points on average – in contrast to developed countries where policy rates have been cut by 98 basis points on average. the exchange rate regime also affects the conduct of monetary policy. as you may all know, many developing countries peg their currencies against the us dollar or the euro. as the us dollar has lost value against many currencies in recent years, this has led to sharp increases in the inflation rates of those economies whose currencies are pegged to the us dollar. in the period of january 2006 to may 2008, inflation rates of countries whose currencies are pegged to the us dollar have increased three - fold to 15. 1 percent from 3. 9 percent. inflation rates of countries whose currencies are pegged to the euro rose to 10. 2 percent from 4. 4 percent. in this period, countries that avoid the nominal appreciation of their currencies have only exacerbated the inflationary effects of supply shocks. the necessary adjustments in real exchange rates have taken place through the rise general price level. until recently, the common view among central banks of developed countries was to give priority to problems in financial markets in absence of inflationary pressures. however, they have slowly acknowledged the fact that the increase in inflation has reached critical levels. accordingly, with