p m w tucker : “ where are the risks? ” speech by mr p m w tucker, executive director and member of the monetary policy committee of the bank of england, at the euromoney global borrowers and investors forum - remarks to the session “ where are the risks? ” 1, london, 23 june 2005. * * * central bankers are fond of discussing myriad uncertainties in the global macroeconomic and financial environment. yet judging by the level of implied volatility, derived from option prices, on a wide range of asset classes, the market perceives uncertainty as fairly low. and, even after the recent adjustment, credit spreads across a wide range of instruments suggest that the premium charged for risk has fallen over recent years. this, all in an environment where long - maturity risk - free forward rates – real and nominal – are unusually low. it is hard to know quite what to make of this, but it forms an important backdrop to the few remarks i want to make today. for this audience, i think the interesting question is not whether or not risk will crystallise, as in one form or another risks crystallise every day. rather, the important question is whether, in the event of nasty shocks, our capital markets can absorb them or whether they have developed characteristics which may, as some suggest, leave them vulnerable. or, more constructively, what risk managers – and the authorities – might usefully monitor to help contain any such risks. it ’ s hardly a new question. but it ’ s one that has gained colour from the debate about derivatives. an oddly polarised debate. overstating it somewhat : in one corner, a group contending that derivatives bring tangible benefits to civilisation. in the other, a group arguing that they have within them the seeds of severe disorder. unsurprisingly, my take is that the truth lies somewhere in between. it is nicely illustrated by the quite extraordinary development of the credit derivatives market over the past five years or so. 2 dispersion of risk, and the price of risk credit derivatives plainly have been used as an effective risk management tool by a number of banks and others. contrary to some suggestions, the acid test is not especially whether banks, individually or in aggregate, have been net sellers of credit risk. individual banks have been able to reduce concentrated loan exposures to single corporates, industries or countries. as the telecom episode reminded everyone just a few years ago, that is really

, the mainland chinese pe and vc market bounced back strongly in 2023. in the first three quarters of this year, funding raised almost matched the total amount raised in 2022. 1 / 5 bis - central bankers'speeches there are good reasons behind the robustness. first is economic size. apac now accounts for more than one third of the world economy, half of which is china. second is growth. in the decade ending 2022, the region registered an average annual growth rate of 4 %, one percentage point higher than the global average. china alone recorded an even more impressive 7 % growth. looking ahead, asia pacific is expected to continue to outpace other regions in economic growth. this is underpinned by strong fundamentals including improving infrastructure, efficient division of labour that makes it highly competitive in the global supply chain, a young and hard - working population, the embrace of technology, a rising middle class that drives private consumption, institutional arrangements such as regional trade pacts, a stable financial system, so on and so forth. investment opportunities in asia abound. take global supply chain for example. for all sorts of reasons, rightly or wrongly, we are seeing the realignment of the global supply chain on a massive scale. the realignment has just started and will take years before things get settled. asia will no doubt remain the key player in the global supply chain, with a more expansive and complex web connecting different countries in the region. imagine the scale of funding required to build efficient transport networks, reliable power supply, storage and logistics, communications and it infrastructure. according to the asian development bank, it is estimated that the funding need for infrastructure across asia would be 1. 7 trillion us dollars per year through 2030 in order to maintain its growth momentum and respond to climate change. and this is just from the manufacturing angle. factor in the additional demand of a more affluent asian population for better housing, better goods, better services, the potential is simply enormous. then there is technology. the asia century will be characterised by the relentless drive to embrace innovation and technology, as a way to improve productivity and raise the quality of living. on top of that, there is also the urgent need to transition asia, which accounts for about half of global carbon emissions, to a greener and more sustainable economy. the success of decarbonisation in asia will be critical to the global effort to tackle climate change, and some 66 trillion us dollars would be required over the next