arrangements for the governance for hong kong. but i think there is much more to be said for " one country, two systems " beyond politics and governance, for the simple reason that there are many differences between the two systems within our country, on whatever dimension one chooses to examine the situation, and differences present opportunities for relative strengths to be exploited and relative weaknesses to be addressed, and synergies maximised to the benefit of all concerned. the economic system on the mainland, described as a socialist market economy, is very different from the economic system of hong kong, a capitalist free market economy. the medical system on the mainland is different from that in hong kong, in terms of the manner in which medical services are delivered and funded, and in terms of the types of medicine used. the tax systems are also very different, so are the labour systems, the educational systems and the transport systems ( we drive on different sides of the road ) ; and, of primary interest to me as monetary authority, so are the monetary and financial systems. china is therefore probably unique in having two different systems, including two different financial systems, in one country. i believe that, beyond politics and governance – the arrangements for which have been quite well bedded down – there is perhaps a need for all concerned to pay greater attention to the opportunities presented by the differences between the two financial systems and to developing a beneficial working relationship between them. put in another way, the relationship between the two systems within the country is a multi - dimensional one. while the governance relationship at the political level is of crucial importance, the relationships on other dimensions also require close attention. one important question that needs to be answered is whether, on any one of these other dimensions, the two systems have a working relationship that maximises the mutual benefits of the two jurisdictions and therefore is in the best interests of the country. the phrase " one country, two systems " was first used in public by deng xiaoping when he received industry and business leaders from hong kong on 22 - 23 june 1984. as monetary authority, i have certain responsibilities for the financial system of hong kong. these derive from the laws of hong kong and are clearly set out in a formal and transparent exchange of letters between the financial secretary and the monetary authority of june 2003 2. i believe therefore that it would not be inappropriate for me to contribute to answering that important question, insofar as the working relationship between the two financial systems in the country is concerned. let me do

has built up an efficient financial infrastructure for debt market development over the years. the exchange fund bills and notes ( efbn ) programme has created a yield curve for the hong kong dollar of up to 10 years, providing a benchmark for debt issuance by other entities. a multi - currency and multi - product payment and settlement platform serves local and overseas investors to facilitate their fund transfers and delivery versus payments when they buy and sell debt instruments. more broadly, the developed financial markets, including derivatives for managing interest - rate and exchange - rate risks, a critical mass of financial institutions and a large investor base, support the growth of the debt market. this brief comparison will, i hope, bring out quite clearly the size, sophistication and efficiency of hong kong ’ s financial system in the context of the country as a whole. it should also give some indication of the actual and potential utility of the financial system of hong kong to the country, in contributing to sustainable economic growth and development on the mainland. it was also deng xiaoping who coined another memorable phrase. he said that : " finance is very important ; it is the nucleus of a modern economy " 3. indeed, the future path of the economy of china depends crucially on how matters concerning money and finance, currency and exchange are organised. to sustain the current rapid pace of economic growth and development, what china needs now is an effective mechanism for financial intermediation for the mainland – a mechanism to mobilise the huge amount of savings the responsibilities of the monetary authority are laid down in the exchange of letters between the financial secretary and the monetary authority on june 2003. the letters can be found on the hkma website. ( http : / / www. info. gov. hk / hkma / eng / press / 2003 / attach / 20030627e3a1. pdf ). the phrase was used by deng xiaoping during a visit to shanghai in the spring of 1991, when the central government decided to develop pudong into a modern financial centre. the phrase is included in the article " the speech during the shanghai visit " in the selected works of deng xiaoping, volume 3. ( " [UNK] [UNK] 上 海 的 [UNK] [UNK] " ， 《 [UNK] 小 平 文 [UNK] 》 [UNK] 三 [UNK] ) ( now equivalent to over 40 % of gdp ) into the hands of those who need funding to finance consumption, investment and other economic activities. currently, domestic savings on the mainland are mostly trapped in the banking system