together, we believe that adb and its partners in the region will go a long way in mobilising funds and building the capacity of developing members in delivering high - quality infrastructure projects. as an international financial and business centre in the region, hong kong, china has an active role to play in supporting and promoting infrastructure investment in asia. corporates, as well as national and multilateral development agencies including adb and ifc, have been making extensive use of hong kong, china ’ s deep financial markets in raising funds for infrastructure projects. joint ventures and funds have been set up in hong kong, china for identifying opportunities and managing investments in infrastructure projects in the region. we have also been seeing increasing offshore issuance of renminbi ( rmb ) bonds in our market to finance infrastructure projects. with the increasing use of rmb in trade and investment in the region, it is expected that the use of rmb in infrastructure financing will continue to rise. hong kong, china, as the largest offshore rmb centre with a wide range of rmb financial services, is well placed to support these infrastructure financing activities denominated in rmb. besides financial services, hong kong, china also has a pool of bis central bankers ’ speeches talents in professional services like construction and planning, surveying, engineering, project management, accounting, legal and arbitration, logistics, etc. firms and consultants of hong kong, china are well placed to take part and support infrastructure developments in the region. substantial investment is needed in many developing asian economies to break the infrastructure bottlenecks and move forward to the next stage of development. increasing cross - border connectivity will also promote greater trade and economic integration, unlocking the region ’ s growth potential. we are pleased to see that adb and national governments are making this a priority and taking meaningful steps to promote infrastructure investment in the region. as a member of the region, hong kong, china stands ready to contribute to this work. bis central bankers ’ speeches

mistakes or shifts in the international economic environment. currently, there are no deep, liquid and mature debt markets in asia for the intermediation process to function more efficiently. the process has begun in the last few years, and with the building of better financial infrastructure, this round of turmoil should add greater impetus to greater cooperation in building better regional financial intermediation. 13. as we all can see in hindsight, the risks involved in international capital flows are exacerbated when short - term capital flows are all attracted to the asset markets. this has led to asset bubbles, with all the painful consequences of asset price deflation. 14. but what is much more evident in asia is that the process of hedging, arbitrage and “ carry trade ”, whereby arbitrageurs borrow in one market and invest in another market that offers higher interest rates, has created both regional and global contagion. portfolio shifts mean that when asset prices change ( and in this i would include : consumer prices, interest rates, exchange rates, debt and equity prices and property prices ) funds will flow in and out to follow the “ law of one price ”. this suggests that open economies must adjust to global prices. the speed of such adjustments is only determined by the degree of openness of the domestic economy and financial markets. in other words, whether we like it or not, we are being priced globally by the market. 15. many of us have not fully appreciated the full logic of this. the financial turmoil suggests that while the real sector causes of the stress is global competition, the financial effect is stress on domestic banking systems, as the banks intermediate the global portfolio adjustments. in an open economy, capital inflows will increase the deposit base of domestic banks which may be channelled through credit mistakes into fuelling domestic asset price bubbles. there are two implications. first, asset price inflation eventually feeds into domestic inflation and erodes external competitiveness. second, excessive lending concentration into less productive assets, either real estate or over - investment in infrastructure and production capacity, exposes the financial institutions to huge risks. 16. from the viewpoint of financial intermediation, there are three major risks in asia that underlie the shocks there : • first, maturity mismatch - - asian markets made the mistake of borrowing short - term capital flows to finance illiquid non - tradables, such as property, thus exposing themselves to huge liquidity needs when capital flows reversed.