risks in the economy to be spread out, shared, and more efficiently managed. and the third lesson is the need to have in place an effective mechanism of economic and financial surveillance to identify potential risks, especially those relating to financial sector and capital flows issues, which are the two most important risks for emerging markets. all three lessons are now well known. and we have seen conscious efforts by national governments and ifi ’ s such as the imf to take heed of these lessons. in asia, at the national level, we see a region - wide move toward a more flexible exchange rate regime, with a disciplined framework in the conduct of monetary and fiscal policies. as for the financial sector, after the initial restructuring and consolidation, the framework of policy has moved towards risk - based supervision, to an adherence to international standards, and to the undertakings of formal financial sector assessments either under fsap or within the country ’ s own financial stability evaluation framework. at the international level, the imf has also come up with many new and important initiatives. as for the financial sector, its financial surveillance process has been deepened with the introduction of fsap and the surveillance of international capital markets under the financial stability forum, and the publication of the global financial stability report. more importantly, the recent initiatives on the new direction of financial sector surveillance is another important step in understanding the linkages between macroeconomic stability and financial vulnerabilities. the new direction aims to integrate financial sector analysis and issues with the article iv process, and then to link the bilateral surveillance with multilateral surveillance. in our view, this is an ambitious undertaking, but is a move in the right direction. the challenge, as we see it, will come from the implementation process, especially on the issue of what should be the adequate scope in terms of issues to be covered, choice of countries, and the analytical approach to be used. these are important questions that will need to be worked out, taking into account resources at the fund. our view is that the initial move on the new direction should not be overly ambitious. it is better for the process to move forward gradually, focusing first on the most systemically important economies. but as far as emerging markets economies are concerned, if surveillance is to be effective in preempting crisis, then i think one question that can be asked is whether the improvements that we are now seeing, as well as the new direction to be taken, are adequate or credible as a mechanism of

##ification to better reflect the increasingly important role of the yuan in international monetary system. last but not least, i hope that the inauguration of our beijing representative office will be more than just another success story. i truly hope that the spirit and friendship behind this long - standing relations and successes, nurtured earnestly over centuries, will continue to serve as solid foundations that will lead to even greater and closer future cooperation between our two nations. let me end by thanking everyone for being an important part of this success. and, with your royal highness ’ permission, may i propose a toast to future success and cooperation as well as to your royal highness ’ s good health and prosperity. thank you. bis central bankers ’ speeches