g20, the financial stability board ( fsb ) and various standard setting bodies – including but not limited to strengthening banks ’ capital and liquidity requirements, reducing moral hazard posed by systemically important financial institutions, and reforming the otc derivatives markets. recently, the fsb decided to set up regional consultative groups, including one for asia, to bring together central banks, finance ministries and regulators in different regions. these groups are expected to serve as a platform for us to discuss and cooperate on issues of interest to regional financial stability, and to reflect the region ’ s collective views to the fsb in the international standard setting process. 9. the second area is enhancing the global and regional financial safety nets. we welcome the recent significant augmentation of imf ’ s resources and lending facilities. these enhancements will allow the imf to respond more effectively and speedily to member countries in need. regionally, the establishment of the chiang mai initiative multilateralisation ( cmim ) further enhances the regional capacity to cope with capital flows and safeguard financial stability of the region. the hkma fully supports this important regional initiative, and indeed we have played an active role in its development and participated directly in the arrangement. 10. the third area is enhancing the capacity of regional capital markets to absorb capital inflows and channel them to productive uses. in this regard, the hkma took the lead in developing the asian bond funds ( abf ) under the aegis of the executives ’ meeting of east asia pacific central banks ( emeap ). the abf, as a pioneer product, aimed to provide a convenient low - cost local - currency instrument for investment, and at the same time help identify and remove the impediments to bond market development. in parallel, with the strong support from the adb, asean + 3 members have undertaken a range of projects under the asian bond markets initiative to promote the development of the local currency bond markets. notwithstanding these regional efforts, we still have a long way to go in developing a regional bond market that is broad and deep enough to channel the region ’ s abundant savings to meet its huge investment needs. continued national and regional efforts in this regard are much needed. emerging asia includes china, hong kong, india, indonesia, korea, malaysia, the philippines, singapore and thailand. bis central bankers ’ speeches 11. at the domestic level, there has been growing recognition that there is no one - sizefits - all approach to capital flows

are two important macro trends that are driving offshore rmb market activities now and in the future. in roughly three years since the relevant policies were liberalised, currently some 10 % of mainland chinaa€™s total trade, about 12 % of foreign direct investment into china and about 4 % of outward direct investment from china are settled in rmb. mr tony shale, chief executive officer, euromoney institutional investor, asia. mr richard morrow, editor, asiamoney. bis central bankersa€™ speeches compare this with the fact that about 30 % of japanese trade is settled in yen, 50a€ “ 60 % of euro area trade is settled in euros, and 80a€ “ 90 % of us trade is settled in us dollars. clearly there is the potential for more rmb transactions a€ “ especially trade and direct investment transactions where regulations have been liberalised a€ “ to be carried out internationally. and we can trust that chinaa€™s economic development and its global links will continue to be at the forefront in the coming years to support a full spate of offshore market activities. currency convertibility and onshore financial market depth and liquidity the second set of characteristics involves currency convertibility and onshore financial market depth and liquidity. the eurodollar market is an offshore market of a convertible currency and supported by extensive links with deep and liquid onshore financial markets. on the other hand, the offshore rmb market is a market of a currency that is not yet fully convertible, and the links with the onshore financial markets are still subject to limitations. the rmb is convertible in respect of the current account and certain capital account items such as direct investments, while other flows like portfolio investments can only be conducted under specified quotas. the opening up of even more channels for two - way flows between the onshore and offshore markets would be required to spur offshore rmb activities. a few years ago, these ideas would have sounded difficult, but today we are edging ever closer to realising many of them, which is indicative of the rapid pace of change in the offshore rmb market. but as we all recognise, this will be a paced process and not something that would or should happen overnight. on this front, the hkma has been engaging with mainland chinese authorities on further expanding fund flows between the onshore and offshore rmb markets. and i am pleased to say that significant progress has been made. most recently, the quota for the rmb qualified