, in late 80s and early 90s, the financial industry was not segmented in china. the disorder financial industry witnessed in early 90s was caused by many reasons, including the lack of legislation, supervision, expertise, internal control and accounting standards. the financial eco - environment then would inevitably give rise to problems. in the first part of 90s, commercial banks were requested to terminate their international business company and credit card company, because many of the disorders were thought to have originated in non - banking companies created by commercial banks. in retrospect, many banks still feel that a separate credit card company to run the business was a meaningful exploration. later on, problems occurred in the stock market and capital market, leading to the perception that it was a dangerous thing for fund to flow from banks into the stock market. at the same time, in consideration of what happened in the great depression, the banking and securities sectors were further segmented. in 1999?? one reason that the four big commercial banks established four asset management companies was that provisions on the management of asset management companies could provide them with some flexibility in disposing of npls, flexibilities that were beyond the reach of commercial banks. for example, asset management companies could do debt equity swap, but commercial banks were not allowed. other methods of asset disposal by asset management companies were also not allowed in the case of commercial banks. the purpose of establishing asset management companies was to dispose of npls in a flexible manner. of course, large - scale transfer of npls out of commercial banks might not be possible in the future ; rather, commercial banks will resolve the problem assets on their own. therefore, if commercial banks are still constrained by the rules of segmented operation in investment, share - holding and asset disposal, their ability to dispose of npls will be limited. in addition, asset management companies also hope to further enhance their capability by establishing their own securities companies to put the assets under their management on the capital market. there should be new considerations and arrangements. we are in favour of reviewing and interpreting history in our endeavor while moving forward. this will help us find a correct way of thinking and create a necessary environment for experimenting cross - sector operation in the financial sector as put forward by the 5th plenum of the 16th cpc national congress. iii. the experiment with cross - sector operation must proceed steadily, because such operation needs a large pool of high quality talents and risk control capability. we all know the importance of talents

supply. it is explanations of this type that market players are most prone to put forward for short - run exchange - rate fluctuations. the most general flow - related explanation is probably the short - term interest rate differential. textbooks teach that international currency flows and nominal exchange rates are susceptible to differences in current and expected monetary policy. today, when monetary policy throughout the industrialised world is focused on price stability, so that interest rate differentials between countries are tending to decrease, the explanatory power of this variable is presumably weaker. another factor that has been of major importance for nominal exchange rates from time to time is the state of the government finances. high and growing government debt leads to expectations of a suspension of payments or a monetary policy realignment in a more inflationary direction. that in turn results in a depreciation of the exchange rate. the picture in sweden since 1975 the swedish krona has weakened in nominal terms by as much as 90 per cent. but at least half of this depreciation can be explained by sweden ’ s higher inflation. and in this respect there has been a decisive change. we now have the same policy commitment to price stability as the rest of the world. that leaves around 40 per cent of the depreciation to account for. our work at the riksbank suggests that in the 1970s and ’ 80s, the major part of the real exchange rate ’ s weakening can be attributed to deteriorating terms of trade, low gdp and productivity growth compared with the rest of the world and growing external debt. one of the models we have used indicates that about three - quarters of the depreciation stemmed from relatively poorer growth in sweden and about a quarter to worsening terms of trade. the picture in the 1990s looks different. as far as we can tell at present, in the past decade neither productivity nor gdp growth has been poorer than in the rest of the world ( fig. 1 ). so in this respect, too, there seems to have been a change for the better. it is partly against this background that the krona ’ s persistently weak average path in the latter part of the 1990s is surprising. fig 1. tcw index and expected growth difference against other countries 1. 5 1. 0 sweden - tcw countries difference expectations / growth tcw index 0. 5 0. 0 - 0. 5 - 1. 0 - 1. 5 mar - 96 nov - 96 jul - 97 mar - 98 nov - 98 jul - 99 mar -