been propelled by strong domestic demand, while the contribution from net exports was either small or negative. in fact, the aggregate trade balance of the region has been gradually declining since 2007, and if intra - regional trade is excluded, it has declined notably from about 4 % of the regional gdp in mid - 2007 to less than 2 % at end - 2010, the lowest in more than a decade. this gradual change in trade pattern, with regional economies shifting their export markets from deficit countries like the us to surplus countries in the region, has also been contributing to global rebalancing. 8. we also should not overlook the positive attributes of capital flows. while challenging to manage, capital inflows present important opportunities for boosting broaderbased growth. the key is to channel the capital flows into good uses, and particularly towards productive investments. in this regard, promoting capital market development is important to open up additional channels of funding for long - term investments such as infrastructure. the good news is that the region is already taking steps in the right direction by improving the financial infrastructure of bond markets and expanding the investor base. meanwhile, many economies are also making greater use of public - private partnerships to promote critical infrastructure investment projects. 9. in the face of these significant uncertainties and challenges ahead of us, imf ’ s assessment of the prospects and risks, as well as advice on policy response for the region is particularly important at this juncture. we look forward to the presentation by imf and the dialogue during the panel discussions. 10. thank you. bis central bankers ’ speeches

achieved by market forces. i hope that, looking at the matter from a european perspective, you agree with me. the fact of the matter is that diversity or fragmentation leads to individual vulnerability, and interdependence is synonymous with contagion, particularly financial contagion. this is notwithstanding the low degree of financial integration and varying degrees of financial openness. the ingenuity of the financial community can be relied upon to establish financial linkages, where there is none officially allowed, through which what appears to be unmanageable financial risks can be managed and, consequently, financial contagion can be readily transmitted. the emerging markets of asia provide fertile ground for financial innovation. for example, we hear often that the hong kong financial markets provide a perfect hedge, or more modestly, a proxy hedge, for risks in the mainland of china or the region. there is an element of truth in this. after all, this is one of the roles of an international financial centre. but it does mean that, in asia, the dynamics of financial contagion can be quite complex. for example, financial crises do not necessarily erupt and manifest themselves at source - somebody sneezes and others get pneumonia. so, it is only prudent that asian monetary co - operation should be on the agenda of discussions on asian finance, and i have been urging for greater co - operation for some time. i am therefore glad that there has been increasing attention given to the subject in recent years. but, in terms of actual co - operative initiatives, progress has been slow and the scope rather narrow. to be fair, there is consensus on the need for diversification of financial intermediation channels, for enhancing efficiency and financial stability, and this consensus has been manifested in co - operative efforts to develop the bond markets in asia. there are three clusters of initiatives : " what is driving asian exports? ", hkma, august 2003. • the first is the apec initiative on the development of securitisation and credit guarantee markets, which is spearheaded by three apec member economies, namely, hong kong, thailand and korea, and sponsored by the world bank ; • the second is the asian bond market initiative ( abmi ) of the asean + 3 forum ; and • the third is the asian bond fund initiative of emeap, comprising eleven central banks in the region, which has successfully launched abf1, denominated in us dollars and has been working