howard lee : keynote speech – asifma 9th china capital markets conference keynote speech by mr howard lee, deputy chief executive of the hong kong monetary authority, at the asifma 9th china capital markets conference, hong kong, 29 november 2019. * * * riding the wave of portfolio inflows into mainland china mark ( austen ), distinguished guests, ladies and gentlemen, 1. good morning. thank you asifma for hosting this conference in hong kong and inviting me to speak. i am glad to see so many friends of the financial industry here today, from hong kong and other parts of the world. 2. as you all know, hong kong has been going through an extraordinary period since this summer. for those of you who travel to hong kong for this conference, i hope you have so far found the situation on the ground less dramatic than what you might have seen from the news. no doubt we have experienced some serious disruptions to traffic and interruptions to operations of bank branches, but overall speaking the financial infrastructures and markets in hong kong have continued to function smoothly, and they remain robust and resilient. this clearly demonstrates their ability to withstand different types of shocks, as they did multiple times in the past decades. 3. earlier this week, hong kong successfully launched the us $ 13 billion ipo of alibaba. this deal would likely put us at the top spot of the global ipo league table again this year. while that is a secondary listing, it certainly underlines the unique position of hong kong as an international financial centre that connects the fast growing mainland market to global investors. 4. i know some of you may have doubts that the chinese economy is actually slowing down in face of trade dispute and deleveraging. that is true if we compare to the days when mainland gdp was growing at double - digit every year. but let ’ s remember, a real growth of 6 % is still a very respectable pace compared to economies around the world. and with mainland china ’ s sheer size, a 6 % gdp growth means adding some us $ 1. 3 trillion nominal value to the world ’ s gdp in a single year. this is more than the total size of the indonesian economy, or close to that of australia. 5. with such economic expansion and its deepening capital markets, china continues to be a compelling investment theme for global investors. as an investment manager ourselves, we are among the first offshore players in the mainland ’ s capital markets.

rmb bonds in april, which will attract around us $ 120 billion of inflows over the 20 - month inclusion process. but even upon completion, rmb bonds will only account for around 6 % of the overall index, leaving a big gap to fill considering that mainland china is the world ’ s 2 / 4 bis central bankers'speeches second largest bond market. in september, jpmorgan announced a 10 - month phased inclusion of chinese government bonds into its benchmark emerging - market indexes, starting in february 2020. market estimates suggested that the inclusion could lead to around us $ 3 billion of inflows into the onshore bond market per month. mainland china is also on the ftse watchlist for future inclusion into its flagship world government bond index, with the next review in march next year. 13. the takeaway here is that, we are just seeing the tip of an iceberg in the big wave of allocation to chinese assets by investment managers. the pace would likely continue to pick up in the next couple of years. hong kong ’ s unique position and what lies ahead 14. the vast opportunities in the mainland and the connect schemes offer a great example to remind ourselves hong kong ’ s unique value proposition. under the “ one country, two systems ” principle, we maintain a regulatory regime closely aligned with international norms and practices. at the same time, our close rapport with the onshore regulators ensures that we are the best place to experiment capital liberalisation initiatives. we are the only place in the world that practises an english and chinese bilingual common law system that inspires confidence from overseas and mainland investors alike. we have an ecosystem of topnotch financial institutions and professional services firms that are trusted by asset owners and asset managers to look after their investments. these unique advantages cannot be easily replicated anywhere else in the world. 15. of course, apart from providing a convenient conduit for overseas investors to enter the onshore equities and bond markets through the connect schemes, hong kong ’ s stock market has long been a venue for mainland companies to raise funds and for global investors to get exposure to mainland enterprises. today, over 1, 100 mainland enterprises are listed on the stock exchange of hong kong, with a total market capitalisation of nearly hkd22 trillion and an average daily trading volume of around hkd60 billion. 16. and we are not standing still. we are doubling down on our work to enhance our financial platforms, build more