prasarn trairatvorakul : asian and thai economies in a volatile world speech by dr prasarn trairatvorakul, governor of the bank of thailand, at the nation ’ s 43rd anniversary international conference, bangkok, 19 july 2013. * * * distinguished ceo and chairman, members of asia news network, distinguished guests ; ladies and gentlemen, it is a delight to address you on this auspicious occasion of the nation ’ s 43rd anniversary. let me congratulate you warmly, and wish you many flourishing years ahead. we gather here at an important juncture of what seems to be yet another shift in global economic and financial landscape. the three - speed world economy appears to be on a convergence course recently as china and some other emerging markets start to show signs of slowdown, while the us and japan are gathering momentum. these changing global dynamics coinciding with market ’ s enthusiastic reactions to federal reserve ’ s signal of socalled “ qe tapering ” led to a sell - off of emerging market debt and equities, and reversal of foreign capital flows that had rushed into the region earlier this year. living in a more volatile world the financial world has indeed become more volatile. many factors intertwine to render such great financial market volatility we observe today. these include ( 1 ) closer integration of global economy through stronger trade and financial linkages, ( 2 ) increasingly large and mobile capital flows due to lower costs on cross - border investments, ( 3 ) rapid spread of information made possible by advancement in technology, and ( 4 ) more pronounced reactions on the part of market participants in times of heightened uncertainties ever since the onset of the global financial crisis. the interplay between market players ’ expectations, their self - fulfilling nature and spillover effects paves the way for market exuberance in response to a trigger event. as a clear case in point, the recent ups and downs of financial markets upon new information the market perceives from each round of the fed ’ s announcements highlight the role of “ shifts in beliefs ” on market volatility. what made the post - 2008 period particularly vulnerable to such self - fulfilling global turmoil is the current stage of the world economy characterized by lingering structural weaknesses of the crisis countries and limited policy space that reduce the potential of macroeconomic stabilization policy. all of these factors reinforce the role of global shocks and contagion through real linkages as well as expectation channel in transmitting volati

, but will also help to foster the increasing bond of friendship between our respective countries. ’ seventy - five years on, this sentiment remains just as valid as it was in 1942, despite the tremendous change in both our countries since. our files show that it was some years before the bank of china's branch in australia was able to turn a profit – a problem that has now been fixed. when the branch was first established, it was very restricted in its operations. it was limited to operating accounts for the chinese government and officials and for chinese nationals visiting australia. notwithstanding these restrictions, it quickly established a presence in australia. in may 1944, less than two years after operations began, governor armitage wrote to the secretary to the treasury stating : ‘ the bank of china has proved to be a useful adjunct to the banking system in australia, particularly in regard to facilitating the handling of remittances on behalf of chinese citizens. they have faithfully observed the conditions under which they are allowed to operate. ’ today, of course, the bank of china continues to facilitate currency exchange between china and australia, but it is on a much larger scale. in 2014, the bank of china was appointed the official rmb clearing bank for australia, affording it more direct access to china's onshore financial markets and hence the ability to provide rmb liquidity in the australian market. the establishment of the clearing bank has promoted the role of the rmb in trade among australian companies and the development of the pool of local rmb deposits. this is an important development. the bank of china is also providing an important source of finance for chinese companies operating in australia as well as for australian companies. it is making trade easier between our two countries by providing trade finance. it is also helping on the investment side, with securities and investment banking services. the growth of bank of china's operations from currency exchange to facilitating trade and now, more recently, to facilitating investment is mirrored in the deepening relationship between china and australia. on the trade side, in 1942 there was negligible trade between our two countries. today, we are important trading partners. the deepening of the financial relationship is a more recent development and still has some way to go. china is an important source of direct investment in australia and there are an increasing number of investment channels available to australian entities looking to invest in chinese financial markets. as one example of this, the rba holds around 5 per cent of our foreign