stance of such an individual : where you stand ( on an issue ) depends on where you sit ( in the bureaucracy ). consequently, it will take some time before the process of credit allocation becomes entirely market - based and the banks subject to the market disciplines that we are familiar with. one implication of this is that the high npl and low capital adequacy ratios will continue to be a feature, with ebbs and flows, as capital injections get rid of the stock of npl while the flow of npl continues, but hopefully at a reduced pace as corporate governance improves. professionalism cannot be acquired overnight. there is also the need of a proper, market based incentive system, in terms of both monetary and career rewards, for promoting professionalism. this applies not only to employment in the banks, or just in the financial system. it is a fundamental issue concerning the labour market as a whole, which is still characterised by wage levels still being predominantly centrally determined, but labour market reform is obviously out of the scope of this speech. i just want to say that, as in market reform generally, labour market reform takes time and that in the interest of social stability, gradualism is once again the key. indeed, in the long march towards a market economy, there will be conflicts or anomalies that require pragmatism in resolving and doing things by trial and error. one feature in this process is the continuing use of executive authority or administrative measures to effect the necessary macro - economic adjustments rather than the use of financial market instruments. this is unavoidable before the markets have developed to a stage in which they can be relied upon to produce the desired results. the transmission mechanism working through inefficient financial markets must be of doubtful effectiveness. by contrast, although administrative measures are clumsy and authoritarian, they are quick in producing results. the administrative measures introduced in late april of slowing project approvals, reducing land supply, centralising lending authorities and reducing bank credit to specific activities have worked reasonably well. the growth of fixed asset investment, broad money and bank credit slowed down quickly in the second quarter of the year, although not without causing serious concern about the possibility of a hard landing. to be sure, the bluntness of administrative measures did lead to inconveniences and perhaps casualties among innocent parties, as cash flow, for a time, dried up for almost everybody rather than the targeted activities. but by and large the measures are working. and

as it has always been. it is however important to note that this process has begun and hong kong is bound to be a key destination as well as the management hub for the expected gradual increase in portfolio flows from mainland china. this is a trend that financial services providers should not ignore in their business planning process. the wider external use of the rmb now, let me move on to the second important trend : the wider external use of the rmb. since the global financial crisis, mainland china has taken steps to promote a greater use of rmb outside the mainland. the rationale behind this policy move is easily understandable. at present, much of the cross - border trade and investment between the mainland and other jurisdictions are conducted in us dollars. as the mainland continues to expand its international trade and investment, and becomes more economically integrated with the rest of the world, chinese traders, investors and financial institutions will face growing foreign exchange risk if they continue to rely on the us dollar. thus, it is a natural development for mainland china to allow a wider use of rmb in its cross - border trade and investment. from hong kong ’ s perspective, this policy move presents unprecedented opportunities to us, as we can leverage on our strengths as an ifc and our unique position as a gateway between china and the world to provide a premier testing ground for offshore rmb activities. offshore rmb business has been conducted in hong kong since 2004. while the scope of rmb business was limited to retail banking initially, it has been expanded substantially to cover bond issuance, trade settlement, wealth management and further to odi settlement in january this year. these developments have built a solid foundation for developing hong kong into an offshore rmb center. let me briefly summarise these developments in three dimensions. the first dimension is rmb financing. hong kong is the first place outside the mainland that has developed an rmb bond market. so far, 34 rmb bonds have been launched in hong kong with a total issuance size of 80 billion yuan. the issuer base was expanded from only bis central bankers ’ speeches mainland chinese banks at the start, to mainland subsidiaries of hong kong banks and china ’ s ministry of finance in 2009, and further to hong kong corporations and famous international institutions like mcdonald ’ s and the asian development bank last year. any issuers, including foreign corporations and multilateral organisations, can now issue rmb bonds in hong kong, just as they can issue bonds in any other curre