cast a pall over the economy, resulting in a negative feedback loop delaying autonomous recovery. cognitive psychology tells us that perception creates reality. the prevalence of skewed negativism from the damaging demand shock could have dampened investment and new hires, and that in turn could have depressed potential growth. one can interpret this as one form of hysteresis, as described in economic textbooks. fortunately, various measures of business and consumer confidence are on an upswing everywhere, and what i might describe as a chain reaction of pessimism is almost a thing of the past. meanwhile, we are beginning to see active debate on the desirable policy mix for sustaining the recovery, and more generally on a possible new economic policy framework. if these discourses catalyzed by the launch of the new u. s. administration are uplifting business and consumer sentiment in one way or another, i would view this as a clearly positive development. a caveat regarding the global financial system : circularity of offshore dollars even as the global economy improves, there are still fragilities that should not be overlooked. one that i would like to point out is the dollar - denominated debt of some emerging economies, which has been repeatedly called to attention by observers including economists at the bank for international settlements ( bis ). these economies - - especially firms in these economies - - have increased the levels of dollar - denominated debt under the accommodative global monetary environment following the global financial crisis. now, as the united states embarks on monetary policy normalization, we now need to monitor the debt dynamics of these economies from two perspectives : increasing interest payment burden and exchange rate depreciation. mentioning the dollar - denominated debt of emerging market economies calls to mind the 1980s debt crisis in latin america, which shook the world and led to the establishment of the iif to deal with the problem. the origins of the debt crisis could be traced back to the recycling of excess dollars at oil - producing economies, which ballooned in the 1970s, to latin american economies through u. s. and european banks. when the united states began monetary tightening and the dollar began appreciating under the new reagan administration in 1981, the latin american economies suffered deteriorating debt dynamics and soon fell into arrears on their external payments. reflecting on their experiences during the asian monetary and banking crisis of the 1990s, many emerging market economies today have adopted flexible exchange rates, strengthened risk management at banks, and

at present, the whole society has reached broad consensus in protecting environment, establishing a harmonious society and realizing sustainable development. the financial industry should fully realize the importance of energy conservation and reduction of pollutant emission and take social responsibilities in environment protection. the financial markets should guide financial institutions to play an active role in the establishment of an energy conservation and environment - friendly society and promote economic restructuring and a shift of economic growth mode. commercial financial institutions should establish risk awareness when their clients have problems in environment protection, energy consumption and reduction of pollutant emission. in the first quarter of 2007, industries with high energy consumption and heavy pollution grew relatively fast. six industries, that is electricity, steel, non - ferrous metal, construction material, oil chemistry and chemistry industries, accounting for 70 percent of the total energy consumption and emission of sulfur dioxide, grew by 20. 6 percent, up 6. 6 percentage points. the state council has since required to restrain the relatively fast growth of industries with high energy consumption and heavy pollution. with policy guidance, sound legal system and enhanced supervision, industries and enterprises that cannot meet requirements in environment protection, energy conservation and reduction of pollutant emission will face more stringent policy environment. the financial institutions should establish policy risk awareness and stand vigilant to credit risks from companies with high energy consumption, heave pollution and high pollutant emission from the point of increasing credit assets ’ quality. ii. establish information mechanism that benefits environment protection, energy conservation and reduction of pollutant emission first, “ window guidance ” of credit policy should be strengthened. to carry out the comprehensive work plan for energy conservation and reduction of pollutant emission, the pbc, relevant supervisory authorities and the china ’ s associations of banks should enhance their guidance, and remind financial institutions to consider, when they issue credits, how to effectively control high energy consumption and heavy pollutant industries ’ excessively rapid growth, accelerate the removal of obsolete production capacities, promote technology advancement in energy conservation and reduction of pollutant emission, assist the development of recycling economy and earnestly enhance the quality of credit assets. second, information related to the illegal activities of enterprises in environment protection and pollutant emission should be included in the enterprises ’ credit registration system. in recent years, the credit registration system has broadened its coverage of information by including enterprises ’ and individuals credit information and other relevant information and it will include enterprises ’ environment protection information in the future. the credit registration system