issues from indonesia and singapore to support the development of islamic finance. at the same time, we have also seen enhanced co - operation and increased linkages, both internally within the region and externally with other islamic financial centres in the middle east. malaysia, for one, has announced its co - operation with bahrain and dubai, to jointly cooperate and develop islamic banking and finance in the region. at the market level, we have also seen a continuing trend of regional expansion by islamic financial institutions beyond the traditional markets toward newly emerging centres in asia. such changes are happening, despite the challenging environment that firms are currently operating in. one of the most daunting of the changes required for policymakers and regulators is the change in regulations and taxation rules to provide an equitable environment for the operation of islamic finance within the overall financial market framework. within hong kong, with the wealth of expertise drawn from members of the tma, recommendations were put up and analysed by the government as a priority in its comprehensive tax review. the government has concluded that the legal system in hong kong is flexible enough to meet the demands of islamic finance transactions. this is because, with our robust rule of law and our simple tax structure free of capital or interest gains tax, there have only been a minimal number of taxation issues that have to be dealt with. the legislation on tax also gives power to the government to grant tax exemptions where necessary to those who apply for it. the legal architecture in hong kong therefore lends itself well to islamic finance. there is therefore little time to spare, in the run up to a revival of the sukuk market and the lead time it takes to promulgate tax exemption rules for islamic finance transactions ; financial market players in hong kong must gear themselves up to embrace the change coming your way. secondly, there is in general a greater awareness of islamic finance within the local financial community, particularly among banks. banks in hong kong are in the position of being both investors in, and suppliers of islamic finance products. instruments, ranging from retail islamic investment funds and islamic treasury placements at the interbank and corporate level, to islamic loan syndication, have started to emerge in hong kong within the past year. financial market participants have also set up islamic banking windows here to signal their readiness to cater for these types of activities. but even with all the significant developments achieved here in such a short period of time, more still needs to be done. while the recognition of islamic finance as a viable fund

connections with the mainland ’ s markets and consolidate our strengths. 17. one exciting example is the two - way cross - boundary wealth management connect scheme for greater bay area residents, announced earlier this month. this new connect scheme links up hong kong ’ s asset management industry to one of the most economically vibrant and wealthy regions in mainland china, with a population of 60 million and a per - capita gdp of some us $ 20, 000. guangdong is also home to some 290, 000 high net worth families. the wealth management connect will enable mainland residents to directly invest in offshore wealth management products for the first time. for fund companies, there will be opportunities in product origination by developing products in hong kong to tap into the mainland investor base. banks can base their sale and distribution operations in hong kong to reach out to your mainland customers. asset management and treasury operations will also benefit. we are working out the implementation details with the mainland authorities and i hope to be able to share more details with you soon. closing 18. to summarise my message today, we see before us the beginning of a huge wave of inflows going into mainland china ’ s capital markets, propelled by index inclusion and increasing openness of the markets. and the best and safest spot to hitch a ride of the wave is via hong kong and the connect schemes. 19. hong kong ’ s fundamental strengths as one of the best places to do financial transactions and manage assets are well in place. capital flows freely into and out of the territory as guaranteed by article 112 of the basic law. the linked exchange rate system, 3 / 4 bis central bankers'speeches underpinned by us $ 440 billion foreign exchange reserve, continues to anchor our monetary and financial stability, as it has for the past 36 years. the resource and expertise of the biggest global and mainland banks in the region are concentrated in hong kong. and they are well protected against shocks thanks to the ample capital and liquidity buffers. 20. in the last couple of months, i have talked to many dozens of people representing banks, asset owners, asset managers, professional services firms. many are in the audience today. they all recognise the exceptional opportunities offered by hong kong, and see through the current challenges we are facing, because they know hong kong has proven time and again we will ride through difficult times and become even stronger than ever. 21. thank you very much and i wish you an enjoyable and fruitful conference. 4 / 4 bis central