arthur yuen : promoting economic and social development in asia welcome remarks by mr arthur yuen, deputy chief executive of the hong kong monetary authority ( on behalf of mr norman chan, chief executive of the hong kong monetary authority ), at the seminar on " president jin liqun on the asian infrastructure investment bank ’ s operations and projects ", hong kong, 8 november 2016. * * * president jin, distinguished guests, ladies and gentlemen, good morning. it is my pleasure to welcome you to this seminar on the asian infrastructure investment bank ( aiib ) ’ s operations and projects, organised by the hkma infrastructure financing facilitation office ( iffo ). on behalf of the hkma, i ’ m honoured to welcome president jin to hong kong to meet with leaders from the financial and business sectors who have an interest in infrastructure project planning and management. i am delighted to see the strong level of interest and the diversity of business leaders represented in the field. aiib is an important establishment in promoting economic and social development in asia. boasting an initial capital of $ 100 billion and a founding membership of 57 countries, aiib came into operation in january 2016 with a mandate in the development of infrastructure and other productive sectors in asia, including energy and power, transportation and telecommunications, rural infrastructure and agriculture development, water supply and sanitation, environmental protection, urban development and logistics. as we are all aware, president jin has played an instrumental role in shaping up the formation and the guiding principles of aiib. with the huge financing gap for infrastructure development standing at $ 8 trillion in the decade to 2020, aiib will be looking to play a major role in bridging the shortfall. under the strong leadership of president jin, aiib would provide a global platform to coordinate efforts among existing international financial institutions and government authorities to bring development issues to light ; it also has the capability to mobilise the liquidity and field expertise from investors, financiers and project developers from the private sectors to facilitate infrastructure development and their related financing activities. to the hkma, president jin has been a long - time friend. just four months ago, we had the honour of president jin as the officiating guest at the launch of iffo and a key panel speaker at our inaugural conference. president jin acknowledged that iffo can be an important contributor to asian infrastructure by helping to guide liquidity from private and institutional investors into productive investments, while also serving as a platform for communication

good lifestyle now by borrowing huge amounts of money which can only be repaid by his or her children or grandchildren. in other words, allowing or asking governments to spend beyond their means for an extended period of time is tantamount to society mortgaging the income and livelihood of our future generations. such action is irrational and irresponsible, but it ’ s happening all over the world. no wonder some people have bis central bankers ’ speeches posed the question – if this is the kind of world we ’ re living in, is it really worth saving? can central banks save the world? “ yes and no ” 9. rather than trying to answer this metaphysical and provocative question, let me quickly return to the subject of my remarks today : can central banks save the world? the short answer is “ yes and no ”. 10. when a financial crisis occurs and the financial system is facing imminent meltdown, as happened in the wake of the collapse of lehman brothers in 2008, shockwaves in the form of a severe credit crunch normally follow as banks and other financial firms lose confidence in each other and hold on to whatever liquidity they can. the breakdown in the collateral and credit supply chain can lead to the failure of not only illiquid or poorly managed firms, but also otherwise sound and healthy firms. however, central banks, playing the role of lender of last resort, can and should step in to inject the necessary liquidity to allow the financial system to continue to function. if not, illiquidity can quickly turn into insolvency on a systemic scale. given the ability of central banks to create money by expanding their balance sheets, the fed and the world ’ s central banks did exactly that during the latest global financial crisis. this action helped prevent a global financial system meltdown. therefore, we can say central banks can and do save the world during a financial crisis. 11. nevertheless, the ability of central banks to reflate the economy or boost employment during the post crisis recovery is not as clear cut. after the 2008 global financial crisis, the us, followed by europe and japan, reduced interest rates to a very low level. and, when they hit the near zero lower bound, the major central banks embarked on unconventional monetary policies of quantitative or credit easing. so far, the us has created and injected us $ 2. 8 trillion into the banking system and is currently pursuing a monthly us $ 85 billion asset purchase programme. mainstream thinking supports