to be a responsible stakeholder. we seek to achieve this — by putting in place mechanisms to closely monitor market developments and behaviours ; by continually improving our regulatory regimes to mitigate risks in the financial system ; by building buffers and planning for contingencies on sunny days, and by swiftly implementing contingency plans when storm clouds approach ; and by contributing to policy deliberation and standard setting at international regulatory forums. we also build resilience by enabling market participants to seize new opportunities to deepen and expand hong kong ’ s role as an ifc. this brings me to my third word : opportunity. opportunity for many decades hong kong has been intermediating the trade, investment, and financial flows between china and the world. today over 60 per cent of foreign direct investment into the mainland is routed through hong kong. a similar figure applies to china ’ s outward investments. hong kong is the pre - eminent fund - raising venue for mainland corporates, through equity ipos, debt issuance, bank lending, and various forms of private investment. in recent years, two major developments in financial linkage have been gaining momentum. one is the continuous opening of the mainland ’ s financial markets to global investors through the various northbound connect schemes with hong kong. the other is the increasing southbound traffic, again through the connect schemes, that enables mainland investors to invest in overseas financial assets. these are significant developments. they demonstrate china ’ s confidence and willingness to be connected to the global financial markets. the southbound schemes also send a clear 2 / 4 bis central bankers'speeches message : as china ’ s economy grows and its people become more affluent, both institutional and retail investors look for more diversified allocation to overseas assets. let me offer some context here. when we think about the northbound traffic, we should bear in mind that, in global terms, china ’ s stock and bond markets are second in size only to their us counterparts. for the southbound traffic, we are talking about managing the wealth of the world ’ s second largest economy and most populous country. and we are only in the early stages of these two - way flows through the connect schemes. hong kong is the natural choice of venue to host the connect schemes. quite apart from our excellent ecosystem and proven resilience, we have a strong record as the mainland ’ s trusted partner in its entry into the global financial system. we have been able to assist in achieving the desired outcomes while ensuring the integrity and stability of the mainland ’

free and open to support its status as an international financial centre, providing financial services that mobilise us savings to the rest of the world and attracting foreign investments, and servicing domestic financial intermediation at the same time. london, of course, has much of the european economy in addition to the united kingdom economy. hong kong has the mainland of china, the third largest trading partner, the fourth largest economy, the largest foreign reserve holder and home to participants in the key financial markets that collectively form the largest player in the world. the second point i wish to make is that, under " one country, two systems ", there are two financial systems in china, both in a position to serve the interests of the country in the allimportant function of financial intermediation. this is unique and there are no relevant precedents in the financial history of the world. because of the uniqueness of this arrangement, there is understandably considerable scepticism both internationally and within china on how it might work. let me tell you. the two financial systems are different in a variety of ways, with the financial system on the mainland operating in the developing environment of a socialist market economy and the one in hong kong operating in the familiar environment of a capitalist free market economy. we all know that where there are differences, there are opportunities for exploiting relative strengths, addressing relative weaknesses and maximising synergies between the two systems, remembering always the national interest of making financial intermediation more efficient for the country as a whole. in other words, there is a need to develop a complementary, mutually - assisting and interactive relationship between the two financial systems. this incidentally is national policy, articulated by premier wen on the occasion of the national finance working meeting held early last year. given, however, that there are considerable controls in the financial system on the mainland, including capital controls, and that the financial system in hong kong is among the freest in the world, to develop the complementary, mutually - assisting and interactive relationship between the two financial systems there is a need first to establish channels to promote the mobility in an orderly manner between the two financial systems of ( 1 ) money, ( 2 ) investors and fund raisers, ( 3 ) financial instruments and ( 4 ) financial intermediaries. given also the increasing use and the clear prospects of the renminbi as a medium for international financial transactions there is also a need secondly to develop the ability of the financial system in hong