term challenges include managing the ongoing corrections in the real estate sector, leverage in the financial system and more recently, the volatility in the stock market. while these uncertainties may generate concerns over the renminbi in the near term, it needs to be recognised that the long - term growth prospects for china remain intact, and that this will continue to strengthen the foundations that will support the transition of the renminbi as an international reserve currency. china has a high rate of savings, healthy external position, an inherent competitive mass manufacturing advantage and a large educated workforce to sustain its long - term potential economic growth. importantly, the narrative of the global future of china cannot be explained in isolation – it is part of a broader account of the growing importance and greater integration of asia, and the stronger interlinkages with other emerging economies in the global economic landscape. china and the region are becoming more than just global exporters. the increased efforts are seen in the steps to develop more extensive investment and financial linkages in the region as well as the rest of the world through key strategic initiatives such as the one belt one road initiative, the asian infrastructure investment bank and the new development bank. reflecting its expanding role in the global economy and the international financial bis central bankers ’ speeches system, the renminbi will assume greater strategic importance in facilitating the development of these new investment and financial linkages, including meeting the greater demand for infrastructure spending. this is also reinforced by the transition of asia from a global producer to a global consumer thus becoming an important driver of growth in the world economy. the rise of the renminbi is often associated with expectations of rapid capital account liberalisation. in this regard, the historical experience of the major currencies over the recent fifty years holds important lessons for the renminbi. many advanced economies continued to retain significant capital account restrictions until early 1980s, later than the internationalisation process of their currencies that began in earlier decades. such evidence suggests that the transition of the renminbi as an international currency can commence with the gradual and sequential liberalisation of the capital account. china ’ s position on a ‘ managed convertibility ’ approach instead of the traditional ‘ fully or freely convertible ’ can therefore be appreciated given the lessons from the global financial crisis and the risks associated with volatile capital flows even for such a large emerging economy like china. it is important to note that china has made significant progress in this area. this is even acknowledged by the imf in its recent

supervisors to achieve internationally consistent capital standards for insurance companies. we will be introducing changes to improve the liquidity framework and strengthen the quality of capital, focusing in particular on equity as the predominant form of capital. we also support the global initiatives that are aimed at reducing the complexity of products, strengthening transparency and improving incentive structures. an area of current international deliberation which will have a significant implication on the domestic regulatory and supervisory environment is the increased emphasis on the macroprudential dimension of regulation and supervision. a key lesson drawn from the crisis has been the inadequacy of supervision that was primarily focused on individual institutions. even before the build - up of financial imbalances, the underpricing of risk and increased leverage in the financial system had been identified as sources of potential instability well before the eruption of the crisis. the warnings that were issued by central banks and international institutions were largely ignored and failed to result in appropriate responses either by market participants or by the authorities responsible for the oversight of individual financial institutions or the specific market segments. this has led to calls to regulate such market excesses through counter - cyclical or macroprudential measures such as increasing capital buffers in good times which could be drawn upon under stress conditions, the implementation of a leverage ratio to supplement riskbased capital requirements and through - the - cycle provisioning standards. there is also a call for systemically important institutions to be required to meet higher regulatory standards that are reflective of the risks that they pose to the system, rather than a consideration only of their institutional risk profile. the international reactions to these measures have been mixed, mainly because they are extremely difficult to calibrate in a way that will not unduly constrain output potential in good times, while avoiding significant demands for more capital and a confidence crisis during bad times. the bank will carefully assess the details of these measures as they are released, and we will do so taking into account the regulatory and supervisory regime in malaysia. bank negara malaysia has already for some time now, put in place a framework in which the supervision of individual institutions is complemented with macro - prudential assessments. risks identified at the macro - level provide important inputs to supervisory assessments of individual institutions, while the collective behaviours of individual institutions provide information on the build up of risks in the system. financial institutions would already be familiar with this through the financial stability report of the bank and with the stress testing parameters. the ability of the bank to undertake surveillance