been extended to other areas, such as the review of the basel committee core principles for effective supervision, in which hong kong is heavily involved. successful implementation of basel ii depends not just on the standard - setters and the regulators, but also on the banks themselves. the enthusiasm with which the hong kong banking community has taken to basel ii has been impressive. as a senior member of this community, our discussant today is particularly well equipped to provide the perspective from the banks. we are fortunate in having secured david eldon ’ s presence today. after more than 40 years in banking, many of them in hong kong, he is about to retire from the field. he is thus currently much in demand among his many friends within the financial community, who wish to fete him on his retirement. he is also receiving bookings in his new, risk - taking career as popular singer and entertainer – a field in which we wish him every success. i take this opportunity to pay tribute to david for his outstanding contributions to hong kong during difficult and challenging times, not just in the financial sphere, but also in the many community and charitable activities in which he is involved. ladies and gentlemen, it is an honour to welcome governor jaime caruana as speaker, and mr david eldon as discussant. i now have much pleasure in inviting governor caruana to deliver the seventh hkma distinguished lecture.

the rmb has advanced to rank eleven as world payments currency according to swift, a financial messaging service provider. meanwhile the rmb is being added to the foreign exchange reserves of an increasing number of economies. 11. in terms of international transactions where rmb can already play a role, such as in trade settlement and foreign direct investment, transactions in rmb have climbed steadily. today, some 13 percent of all of china ’ s trade transactions are settled in rmb and about 15 to 20 percent of foreign direct investment into china is conducted in the currency. bearing in mind that the rmb trade - settlement pilot scheme was only introduced in 2009, this is an impressive achievement in such a short space of time. and there is plenty of room for further expansion of these numbers. 12. the greater use of rmb in international transactions will be closely related to china ’ s financial reforms and liberalisation, with new fund flow channels being opened up in rmb. for example, the rmb qfii scheme allows offshore institutions to use rmb funds to invest in chinese capital markets, and it is a new channel in addition to the us dollar - based qfii scheme. and further to a recent relaxation, outflows under the qdii scheme can also be made in rmb. such developments, in turn, will bolster the use of the rmb in trade, foreign direct investment and international transactions, thereby supporting the further development of the offshore rmb market. 13. while recent developments in rmb have been exciting, given the possible scope of future expansion, we are probably still only at the early stage of what could be more significant changes in the years to come. after all, rmb deposits and bonds outstanding in the offshore market only account for about one percent of onshore deposits and outstanding debt respectively. the possibility for expansion remains substantial. 14. one of the aims of the hong kong - london forum is to assess what all this means to the financial institutions and to corporates — many of whose representatives are gathered here today. 15. for corporates, especially those already having business links with china, it is important to get prepared for the increasing use of rmb as a currency for transaction, financing and investments. indeed some companies have already begun to adapt their internal systems and processes so that they are able to make greater use of rmb, both in dealing with their chinese counterparts and in their own financial management. this integration of rmb in their business decisions has