surveillance over major financial markets. its policy analysis needs to be balanced, giving full regard to members ’ circumstances. the 2007 decision distracted the attention of the fund and the international community from real systemic risks, and delayed policy responses. the revision of the operational guidance in may was a small step in the right direction. we call for a timely thorough review of the 2007 decision in order to avoid a recurrence of past mistakes. we welcome the progress achieved with the early warning exercise ( ewe ), and support the continued cooperation with the fsb to improve ewe methodology and enhance ewe capabilities. with regard to ewe communication issues, the fund needs to ensure both communication effectiveness and confidentiality of sensitive information. the analytical results of the ewe should be integrated with multilateral and bilateral surveillance. it is particularly important to ensure that the developed countries with significant vulnerability and potential spillover risks implement appropriate measures to address such risks and that policies are implemented in the areas that require joint efforts. we welcome the package of reform measures adopted by the fund with respect to lending facilities and financing mechanisms for low - income countries. the international community should pay close attention to and minimize the damage to low - income countries caused by the current financial crisis. we call on the international community to provide greater support to help low - income countries weather the crisis. we welcome the fund ’ s increased flexibility with nonconcessional financing to low - income countries. given the large gap for development financing, we call on the fund to work with other international financial institutions to explore new financing mechanisms for more effective reallocation of productive resources to low - income countries. the current crisis has caused severe damages to the current international financial system. restoration of international monetary and financial order is the shared responsibility of the fund and the whole membership. the result of our efforts will be critical to the future of the fund and the world economy. and the capacity of the fund to deliver depends on the outcome of the reforms currently under way. a significant quota realignment along with other governance reforms could help it go a long way toward enhancing its legitimacy and its effectiveness in promoting global financial stability and sustainable growth through independent, even - handed, and effective surveillance.

zhou xiaochuan : macro - prudential policy – asian perspective opening remarks by mr zhou xiaochuan, governor of the people ’ s bank of china, at the highlevel seminar on “ macro - prudential policy : asian perspective ”, shanghai, 18 october 2010. * * * distinguished managing director kahn, distinguished first deputy managing director lipsky, ladies and gentlemen, good morning! it is a pleasure to meet friends old and new in shanghai in this beautiful autumn to discuss macro - prudential policy. on behalf of the people ’ s bank of china, i want to extend the warmest welcome to representatives from international organizations and officials from central banks, ministries of finance and financial regulators. reviewing the global financial crises in history, we know that a crisis will prompt fresh institutional reforms in addition to causing massive damages. since the outbreak of this round of crisis, the international community has agreed on the need to strengthen efforts to implement macro prudential policy. in the past few decades, the many new developments in financial sector undergone, as reflected in positive feedbacks and pro - cyclicality in the economic and financial system, worked together with various other factors and ingredients such as insufficient early warning, inappropriate management and contagion, and produced the worst crisis since the “ great recession ”. a key lesson from this crisis is that risk prevention should focus not only on single financial institution or single sector, but also on systemic risks. macro - prudential policy is the very solution that addresses systemic risks. after the outbreak of the crisis, the international monetary fund and the financial stability board stated clearly that implementing macro - prudential policy should be central banks ’ responsibility. countries have since then also enhanced central banks ’ macro - prudential policy functions in their financial reform. at the request of g20 financial summit, the financial stability board ( fsb ), the basel committee on banking supervision ( bcbs ) and other standard - setting bodies are working to develop institutional arrangements and tools to strengthen macro - prudential policy, establish mechanism to mitigate pro - cyclical factors, raise regulatory standards on systemically important financial institutions, and improve risk disposal and settlement arrangements. the international practice of strengthening macro prudential policy will be a boost to china ’ s financial reform and development. the chinese financial system has basically withstood the shocks of the recent crisis because of the following reasons. first, continued economic growth has created a benign environment. second, after the asian financial