spillover effects of the three rounds of tariffs have already been experienced by various asian economies, as we have seen exports slowing in a number of economies. here in hong kong re - export volumes destined for china or the us that are on the tariff lists fell in the fourth quarter of 2018. while we ’ re all hopeful that a resolution is on its way, we should also be prepared for further damage to businesses and confidence if the conflict continues to linger. another near - term risk is the recent shift in the stance of monetary policy in the advanced economies from tightening to accommodative. in principle, this could be beneficial to asian currencies and investor sentiments ; but it could also be the impetus to new rounds of capital flow “ surges - and - flights ”. it ’ s therefore imperative for our region to manage and allocate the surges efficiently with the view that there may be a potential reversal later on. turning to longer - term challenges, a key one for asia is adaptation to china ’ s ongoing economic transformation. we have already seen some economies in the region benefitting from this transformation in recent years, by stepping into certain manufacturing sectors that china has exited, while others have boosted participation in china ’ s value chain, especially in high - tech 1 / 4 bis central bankers'speeches sectors. the continued opening up of capital markets means that financial linkages between china and other asian economies will also become tighter. but amid this transition is the possibility that an economy ends up being left out because it didn ’ t adapt effectively. i ’ d imagine, for example, that economies overly dependent on exports geared toward filling china ’ s investment demand may lose out to those that focus on supplying consumption goods and providing financial services. so while i don ’ t see china ’ s economic transition leading to “ black swans ” for asian economies, the risk would be for economies to “ fall behind ” in the process. another longer - term challenge — and one that ’ s perhaps most important — is the chance that some economies in our region might fall into the so - called “ middle income trap ”. the middle income trap is the phenomenon that many emerging economies slow markedly as per capita income approaches a certain level, typically estimated to be around us $ 20, 000. many important economies in asia are already approaching that level, so we should all be thinking about this challenge before it ’ s too late. trends such as population ageing, a slowdown of urbanisation, low productivity

as a result of overinvestment, and the lack of financial market development are generally cited as the causes of the middle income trap. one would think that the reversal of these trends could help economies evade the trap, but this of course is easier said than done. crucial role of financial market development while issues such as population ageing are probably best left to other forums, those of us here today are well - suited to think about how financial market developments can help asian economies overcome the two longer - term challenges. informed by hong kong ’ s blueprint as an international financial centre, let me share a few thoughts on this issue. first, both longer term challenges – navigating china ’ s economic transition, and evading the middle income trap – require asia ’ s financial institutions to be tech - forward. around the world, we have seen fintech play a key role, with innovations ranging from the digitalisation of traditional banking activities, to ones aimed at promoting financial inclusion. at the hkma, we have been proactive in using technologies to make financial services more accessible, especially for consumers and smes. over the past year, we have launched open api, a framework that allows third party providers to aggregate information about the products and services offered by different banks for the benefit of end - users. licences have now been granted to three virtual banks, with potentially more on the way, which will enhance the spectrum of products and services available to retail customers and smes. another application launched was faster payment systems or fps, a 24 / 7 retail payment platform that offers cross - bank, cross - ewallet transfers in hong kong dollar or rmb. all that ’ s needed is the recipient ’ s phone number or email address. we have also introduced applications that help corporations : the etradeconnect platform, for example, uses dlt - based technology to bring the paperwork - heavy trade financing business into the digital era. other asian economies have also been actively engaged in fintech solutions that help make access to financial services easier for their constituents. without a doubt, a lot more work still needs to be done on fintech, especially when compared with other areas such as e - commerce and social networking where the impact of technology has been and continues to be immense. second, asian economies need to continue to promote long - term investments and stable capital markets. research has firmly established that well - functioning financial systems are crucial to economic development, and that capital mobility in particular is