, 11 % uk, 10. 5 % japan, 10 % canada, 8 % germany and 6. 5 % switzerland - with the us itself at 8 %. how many of you would have got this right ex ante? i hesitate to try to draw any profound conclusions from this, other than that, with us inflation averaging about 3 %, there was clearly a reasonable real return to be had everywhere. you did not have to be greedy to survive. the argument of the monetarist school that - to put it in a slightly condensed form - monetary factors do not have a lasting effect on real developments, was especially fashionable during the 1970s when governments were criticised for conceding to inflation in the mistaken belief that they could thereby sustain or stimulate activity. subsequent experience has proved, if anything, that the optimal monetary stance is, quite simply, a continuing steady one, and that variance on either side - whether too tight or too loose and after allowing for any real shocks - may incur lasting economic losses. thus, today, the received wisdom is that central banks should follow clearly articulated policies aimed at a stable monetary environment. this in turn begs the question of how to define a stable monetary environment. in hong kong, a highly open economy with no capital controls, we focus on stability of the exchange rate, but this regime itself requires a flexible economic structure and a sound banking sector. i believe that hong kong possesses those attributes, as demonstrated not least by the adjustment of the past two years, and that the peg remains the appropriate regime for us, but i would be the first to admit that it is may not suit others. from the point of view of investors, it is the stability and credibility of macroeconomic policy as a whole which probably determines, or ought to determine, investment strategy. as experience tells us, it can be a costly mistake to pay attention only to particular parts of the policy regime, such as the exchange rate, without scrutinising the wider context in order to be satisfied that the overall design is credible. and so it is my pleasure to help to launch this conference today, and to welcome those of you from outside hong kong. we pride ourselves in being a place which offers not only a wide choice of excellent conference facilities but also, more importantly, the critical mass of financial and ancillary services which issuers and investors require - and which many of you here today contribute to. much has been written of late as to whether costs in hong kong are too

high. let me ask you to reflect on the following. cities such as london and new york have a reputation for being expensive. so also do of a number of capital cities in former communist countries. in a very general sense one can say that london and new york are expensive as a consequence of success as business centres and because, presumably, people still feel that there is value for money there. i leave you to judge whether the others would fit that description ; to my understanding, some of them have become expensive for rather different and less palatable reasons. i strongly believe that hong kong fits the london - new york paradigm. actually, our competitiveness ( as measured by the real effective exchange rate ) is now back where it was in mid - 1997 before the onset of the asian crisis, thanks to the sharp adjustment of property prices and reductions in labour costs, and with help from a strengthening of other currencies, notably the yen. nevertheless, although costs may now be back closer to their norm, hong kong will never be a cheap place. but when you take account of what is on offer here and the high productivity of the labour force, i hope you will agree that you get value for money. of course it is crucial for us all to pay continuing attention to raising efficiency and containing costs, but let ’ s not lose sight of the fact that emergence as a relatively high - salary, high - rent business centre is a symptom of success, not a reason for failure. i wish you all an enjoyable and fruitful conference.