savings ratio and current account surplus in east asian countries are a result of the rescue plan of the international financial institutions. the rescue plan kept silent on international speculative capital flows, which otherwise should have been put under scrutiny. instead, excessive and stringent conditionalities were imposed, demanding that the crisis countries adopt stringent fiscal and monetary policies, raise interest rates, cut fiscal deficits and increase foreign reserves. in the decade thereafter, east asian countries have learnt the lessons, increased savings and foreign reserves and successfully enhanced their resilience to financial crisis. of course, east asian countries had their own problems. vulnerabilities existed in economic development patterns, foreign debt management as well as institutional capacity. sweeping structural reforms on corporate and financial sectors have been launched since the crisis. meanwhile, a large number of countries improved their social security system, and reformed the education and healthcare systems. however, it takes time for these efforts to take effect. iii. can china adjust its savings ratio effectively? during the asian financial crisis, some western academia suggested devaluating yuan. some others preferred a stable yuan, for the sake of preventing competitive devaluation. china, as a responsible large country, did not devalue and paid the price – a fairly slow recovery. the endeavor of the chinese authorities to maintain the stability of rmb against all odds contributed to stemming the spread of the financial crisis. after the crisis, as the market - oriented reform deepened, china intensified the efforts in reforming its corporate and government sectors. profitability of enterprises, especially soes, increased ; fiscal position improved and household income increased steadily. savings ratio began to increase significantly from 2002. ( chart 1 ) the policy intention of the chinese authorities to lower savings ratio is clear, but indepth research is needed as for specific measures to take. boosting domestic demand and encouraging consumption have been important components of the national economic policies since 2005. these policies would eventually bring down the savings ratio. however, in - depth and systematic analysis is needed to identify factors influencing the savings ratio, their elasticity, and the adjustment measures to take. the surge of savings ratio since 2002 is not evenly distributed between household savings and corporate savings, with the increase of corporate savings outpaced that of household savings. corporate savings ratio increased to 49. 9 % in 2007 from 37. 5 % in 1998. the disposable income of the corporate sector accounted for 13 % of the total national disposable income. this ratio increased to

need for greater efforts to be made to establish a level playing field in the conduct of islamic finance business vis - a - vis conventional activities. this includes a review of tax laws in hong kong. the hksar government is now conducting a review of tax laws to ensure that islamic financial transactions will not be disadvantaged simply because of their special structure to cater for compliance with the shariah law. apart from that, we are also focusing our efforts in three major areas. the first involves efforts to connect the hong kong platform with financial institutions and investors interested in islamic finance. that involves the need to raise the international profile of hong kong ’ s platform for islamic finance. the presentation of this flagship showcase in both dubai and jordan is an important milestone in advancing the city ’ s profile and heightening awareness. of equal importance is that, through this forum, we can establish complementary and mutually beneficial relationships for players in our financial markets. the second area is our efforts to deepen market knowledge in hong kong about islamic finance products. in this regard, the treasury markets association can play a significant role in providing an avenue for open and useful discussions and the sharing of experiences from experts in this field, thereby enhancing the knowledge of our local market players. third, we are working hard to forge closer international links through co - operation with islamic finance centres and organisations. establishing business links is particularly important in face of the challenges brought by the integration of islamic finance with the international financial system. in this regard, i am pleased to mention that hong kong has formed a working group with the dubai international financial centre authority to promote the mutual development of islamic finance and financial market infrastructure. closing remarks in closing, i would like to point you to an analogy often made between the rise of islamic finance and the renaissance of the silk road. let ’ s remember the silk road, in ancient times, was china ’ s link to the outside world and a route for trade and exchange of art, music, culture and religion. today, hong kong is right at the heart of the new silk road, standing astride east and the west, and providing a gateway to business and financial opportunities. we have already painted a picture of how the financial regulators and industry associations will strive to promote the development of islamic finance in hong kong, and we hope very much that the enormous forces of the market will make the new silk road as prosperous and significant as the old one. thank you very much.