to determine domestic policies. i am sure for example that we would be keen to talk to each other about how to strengthen our monetary defensive mechanisms against attacks on our currencies, and how to enhance the pain tolerance level of our financial systems so that we can absorb financial shocks more effectively. there is also considerable interest in building more robust financial infrastructures on the one hand to facilitate effective financial intermediation and on the other hand to limit the contagion effect of financial crises domestically and on a regional basis. i believe that this is a sensible way forward, at least for the time being. at the emeap forum, monetary authorities have, as i mentioned earlier, examined the whole spectrum of central banking functions quite comprehensively and have identified issues where monetary co - operation would be beneficial. 46. before going into these issues, let me just make two points about the approach that should be adopted in asian monetary co - operation. first is that asian monetary co - operation must be considered within the context of global monetary co - operation. in other words, we should not, and i believe we are not trying to, build fortress asia. i do not believe that this is in the best interest of asia. it is essential that we work within the international monetary and institutional framework as much as possible. let us not forget that the international monetary order is still largely determined by the g - 3 currencies. asian economies cannot on their own, or without the help of others, determine the fate of the g - 3 currencies, even though we may have views about the future system. - 10 - 47. second is that, given the great diversity of the economies in the region, being at very different stages of financial development, asian monetary co - operation should proceed with flexibility and at a pace comfortable to those wishing to take part in it. it would be pragmatic to build monetary co - operation and establish links, perhaps first at the bilateral level, between those who are ready and willing, and are operating compatible systems : for example, bilateral repurchase agreements of us treasury securities to enhance each other ’ s liquidity of foreign reserves, or bilateral linkages of real time payment systems and clearing systems for securities to facilitate effective financial intermediation across the cooperating economies. these bilateral linkages would serve to set targets and standards for others in the region who are not quite ready. and when eventually the majority of the bilateral linkages have been established, we would then

and in a flexible way, starting with less ambitious goals and proceed at a pace and with arrangements comfortable to all. i believe the approach of building an asian monetary network capable of further linkages to form a global monetary network is the correct one. it is based on voluntary participation and accommodates each participant ’ s unique circumstances. we do not have the visionaries of europe that saw the need for a single currency, nor do we believe that a single global institution would be adequate in providing solutions to all asian monetary problems. in the asian pragmatic and patient way, and using the wise words of the late deng xiaoping, we cross the river by groping for the stones. i am confident that in the end, we will be able to build a robust and efficient asian monetary network that would contribute to monetary and financial stability, and economic prosperity in asia, and in turn contribute to global financial stability and prosperity. 61. i cannot end this lecture without paying tribute to the tremendous support and co - operation that the hong kong monetary authority has received since its formation only four and a half years ago. i want specifically to acknowledge the unstinting support of the people ’ s bank of - 13 - china and the bank of england. without their guidance the hong kong monetary authority would not have become a reality. the bank of japan, the bundesbank and the federal reserve bank of new york have also been generous in their support when we went around the international financial centres to explain the unique concept and practice of “ one country, two systems ”. all our fellow central banks and monetary authorities in emeap, seanza, and bis showed us great kindness and support during the sensitive transitional period to the resumption of sovereignty by china in 1997. indeed, the hong kong monetary authority is itself the fruit of monetary co - operation. 62. when asked what comes after 1997, we used to give the very simple reply : what comes after 1997 must be 1998. as you can see for yourself, with goodwill and co - operation, the prosperity of hong kong has been ensured, both before and after the resumption of sovereignty to china. you have my assurance, and the assurance of china, that hong kong will continue to play its role as an international financial centre. we will work hand in hand with all central bankers around the world to build a safer and more robust international monetary system. thank you.