eddie yue : structural reforms needed to improve asia ’ s economies statement by mr eddie yue, deputy chief executive of the hong kong monetary authority, and head of delegation, hong kong, for the 47th asian development bank annual meeting, astana, kazakhstan, 4 – 5 may 2014. * * * i would like to express my gratitude to the government of kazakhstan for hosting the 47th annual meeting of the asian development bank ( adb ) and the people of kazakhstan for their hospitality. i would also like to thank the management and staff of adb for the excellent organisation of the event. since the last adb annual meeting, we have seen a modest and uneven global recovery, with the advanced economies showing a pickup in economic activities while emerging market economies ( emes ) generally experiencing a moderation in growth. financial markets have turned more volatile in response to the changing pattern of global growth and expectations of a turning point in us monetary policy, and a number of emes have seen a sharp reversal of capital flows. regional economies have remained relatively resilient in the recent bouts of financial market volatility, thanks mainly to the stronger fundamentals of the region nowadays. since the asian financial crisis, many regional economies have implemented reforms to improve their macroeconomic management and fiscal positions, built up foreign reserves and strengthened their financial sectors. for some economies that were more affected by the recent financial market turmoil, they have also taken credible policies to address domestic imbalances and have been successful in restoring investors ’ confidence so far. nevertheless, we cannot afford to be complacent as what we had experienced in the past year was probably a prelude to, rather than the end of, a period of heightened market volatility. the sentiment of global financial markets has turned more sanguine recently amid expectation of prolonged low interest rates in the us. however, the pace of monetary normalisation in the us is very much uncertain and data dependent. with a large part of the cumulated capital inflows to asia since 2009 still in the region, it is possible that regional economies with domestic vulnerabilities built up during the period of ultra - loose global monetary conditions could experience sharp corrections when capital flows ultimately reverse. it is therefore imperative that regional economies should make use of the current breathing space to put their own house in order, take credible measures to reduce macroeconomic and financial imbalances, step up surveillance and ready contingency plans and liquidity backstops such as the use of foreign reserves and bilateral

financial centre depends crucially on its soft powers, not just on hard infrastructure. hong kong is uniquely well positioned to take advantage and play a pivotal role in the new era of china ’ s growth story and in the internationalisation of rmb. hong kong enjoys both first - mover advantages as well as many irreplaceable structural advantages, given hong kong ’ s very close links with the mainland in trade, investment and finance under the “ one country, two systems ” principle. however, there is absolutely no room for complacency. as this new era of rmb internationalisation has just begun, we still have a long, long way to go as the offshore rmb markets continue to grow and mature, while the capital account controls in mainland china are being gradually relaxed or lifted. in the early stages of this new era, the primary task of hong kong is to develop the cnh market and at the same time work with other financial centres such as sydney, london or paris to grow the pie, leading to win - win outcomes. as we move into the more mature stages of the internationalisation of rmb, the available policy headroom should be quite ample for the markets to flourish. at that time, the 2nd and 3rd elements of pips, i. e. infrastructure and people / products, would matter a great deal more if hong kong wishes to retain its competitive edge over the others. it will be up to our industry, financial firms and market practitioners to out compete the other centres in terms of product innovation and distribution of various financial products and services that best serve the needs of their clients. i am sure that the tma, with the support of its members and the financial industry, will continue to play a leading role in developing the professionalism of the practitioners and in facilitating product innovation. thank you. bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches