peter pang : islamic capital and money markets welcoming remarks by mr peter pang, deputy chief executive, hong kong monetary authority, at the workshop on “ islamic capital and money markets ”, hong kong, 19 march 2013. * * * distinguished guests, ladies and gentlemen, 1. it is my great pleasure to welcome you to this islamic finance workshop. we are particularly grateful to mr. mohd. radzuan, mr. azidy and mr. azahari, the experts from malaysia, who have flown all the way to hong kong to share with us their knowledge on islamic capital and money markets and their valuable experience in developing these critical components of islamic finance. i would also like to thank mr. najmuddin of bank negara malaysia for bringing the malaysian delegation here. two fast developing asset classes in the global markets 2. this workshop comes at a very opportune time as hong kong is looking to develop islamic finance as a way to diversify our financial platform and further enhance our capability as an international financial centre. in my view, to be a truly international financial centre, one needs to develop a conducive platform for the two fast developing asset classes in the global markets – islamic financial products and rmb - denominated investment assets. 3. the development of islamic financial markets has been phenomenal in the past two decades. the size of global islamic finance assets made a quantum leap from only us $ 150 billion in the mid - 1990s to us $ 1. 3 trillion at the end of 2011. 1 although the investment climate has been clouded by the us sub - prime crisis and the european sovereign debt problems in recent years, the global sukuk market is powering ahead. indeed, last year was the best year for the global sukuk market on record, with sukuk issuances growing by more than 60 % year - on - year, taking the outstanding sukuk amount to a new height of us $ 240 billion. 2 according to some market estimates, the size of the global islamic finance industry has the potential to increase five - fold from the current level to some us $ 6. 5 trillion by 2020. 3 4. the development of rmb - denominated investment products is equally impressive. in a short space of 6 years, the size of the rmb dim sum bond market in hong kong has grown from a modest amount of 10 billion yuan in 2007 to 237 billion yuan at the end of 2012. offshore rmb

percent in the short run depending on developments in crude oil prices, but is expected gradually to rise in the longer run. however, the pace of increase is likely to be moderate, given that the sensitivity of prices to changes in the output gap is declining due to factors such as economic globalization and deregulation. the year - on - year rate of increase in the cpi is expected to be slightly above 0 percent in fiscal 2007 and around 0. 5 percent in fiscal 2008. v. upside and downside risks to the outlook for economic activity i have so far outlined the most likely projection for the next two years or so. however, the economy constantly faces various risks, and due attention should be paid to the possibility that economic activity and prices might deviate from this projection should particular risks materialize. in the april 2007 outlook report, we pointed out the following as upside and downside risks to the outlook for economic activity : developments in the global economy ; supply and demand conditions for it - related goods ; and possible larger swings in financial and economic activity. let me elaborate on each risk. the first risk concerns developments in the global economy, which is expected to keep expanding with momentum being gained across a wide range of economies. in the united states, adjustments in the housing market, including problems in the market for subprime mortgage debt, are still ongoing, and some leading indicators of business fixed investment have been showing somewhat weak developments. if adjustments in the housing market turn out to be greater than expected or business fixed investment weakens, economic growth may decelerate further. on the other hand, there is a risk that inflationary pressures in the united states may persist longer than expected, given that the rate of change in the core cpi has been somewhat elevated reflecting higher utilization of resources. if inflationary pressures do not subside, there is a risk that not only the u. s. but also the global economy and financial markets may be adversely affected, for instance, through the reaction of long - term interest rates and foreign exchange rates to this situation. in china, there is an upside risk of the economy growing faster than expected, particularly fixed asset investments and exports. whether this risk can be reduced and the chinese economy can realize stable growth even after the 2008 olympic games in beijing should be the focus of attention. the second risk concerns supply and demand conditions for it - related goods. inventory adjustments of it - related goods are continuing, and this seems to be the result mainly of specific domestic