do not jeopardise the stability of the world economy. today i intend to cover four items : the implications of the single currency for exchange rate policy, the institutional arrangements for the euro area ’ s exchange rate policy, exchange rate developments during the crisis and, finally, some other dimensions of international monetary cooperation. a single currency – a single exchange rate policy what did the creation of the euro mean for exchange rate policy? prima facie, the answer is straightforward. having a single currency automatically implies having a single exchange rate and thus also a single exchange rate policy. yet the repercussions of emu go beyond these “ automatic ” consequences. prior to emu, europe consisted of open and, for the most part, small economies. because of the very large size of the external sector compared with the national economy, the exchange rate played a very important role in the economic performance of these countries. the move to monetary union implied the creation of a new economic entity – “ euroland ” – which is much bigger and much more closed than its component states. this obviously reduces the importance of the exchange rate for “ domestic ” economic developments. in addition, monetary union – by definition – did away with nominal exchange rates between its participants. as a result, gone are the days when an economic or financial crisis could also trigger an exchange rate crisis. by setting up a bigger and less open economic entity and by eliminating intra - area exchange rates, the euro acts as a shield against external turbulence.. the economic crisis has clearly demonstrated this. in rough financial waters, it pays off to be on a large, solid and stable ship rather than on a small vessel. size matters in a global world. allow me therefore to make a bold point : the euro has arguably been the best exchange rate policy decision which europe has ever taken. institutional arrangements for exchange rate policy in the euro area this brings me to my second topic : the institutional arrangements for the euro area ’ s exchange rate policy. in describing these arrangements, we should distinguish between three categories of countries : eu countries which do not take part in erm ii, eu countries which are part of erm - ii, and non - eu countries. first, consider the eu countries which do not take part in erm ii. as eu member states, these countries are subject to the treaty. and the treaty is crystal clear : each country must treat its exchange rate policy as a matter of common interest. 1 this obligation should not be taken lightly

to a larger variety of enterprises, the foreign exchange market has grown rapidly. the trading volume in the first half of 2007 was 4. 5 times that in the corresponding period of 2005. in the future, in order to support overseas investment and operation of chinese enterprises, we will make fresh efforts to develop the foreign exchange market, promote products diversification, and create a more favorable environment for instrument innovation. second, there will be stronger financial policy support. the foreign exchange administration reform will be deepened by lifting unnecessary controls and simplifying procedures to provide foreign exchange convenience to enterprises investing and operating abroad. last year, the quota limit of foreign exchange purchase for overseas investment purpose was abolished to satisfy the need of enterprises in outward investment. in the next step, we will lift the control in terms of verification of sources of foreign exchange fund, examination prior to foreign exchange purchase, and repatriation of outward investment profit ; we will allow enterprises to conduct outward investment with their own or purchased foreign exchange, and make it more convenient to use and transfer foreign exchange ; research will be made to explore channels for domestic enterprises and financial institutions to support enterprises investing and operating abroad with foreign exchange. third, financial services will be improved to support eligible enterprises to invest and operate in other countries. qualified financial institutions will be encouraged to establish overseas operations, and explore equity investment in overseas financial institutions through merger and acquisition, in order to provide enterprises with convenient financial services in their overseas investment and operation ; enterprises investing and operating abroad are encouraged to take advantage of financing tools in host countries such as lending, asset securitization, stock offering, bond issue, project financing, and etc ; domestic investment entities will be allowed to provide financing guarantee to their overseas subsidiaries subject to approval. fourth, regional financial platforms will be used to encourage enterprises to take part in international economic cooperation. china is a member of various regional development banks including asia development bank, africa development bank, west africa development bank, pta bank and caribbean development bank, and has applied to join the inter - american development bank. good cooperative relations have been developed with these regional development institutions. the people ’ s bank has signed bilateral technical cooperation agreement or established bilateral technical cooperation fund with the africa development bank, west africa development bank, and caribbean development bank. it is desirable to use these regional development banks as a platform for exchanges, and conduct project consulting and market research through bilateral technical cooperation fund and agreements, and better understand the business and legal environment of host countries. this will