such risks in future, while steps taken to moderate the flows of total social financing seem, so far, to have had some success. in the meantime, a broader set of other recent reforms represent further incremental steps towards greater financial market liberalisation : the removal of restrictions on most lending rates and some liabilities, with those on deposit rates expected to follow ; the recent widening bis central bankers ’ speeches of the renminbi ’ s trading band, as part of the central bank ’ s commitment to let markets play a greater role in the economy ; and the introduction of the shanghai free trade zone with some associated easing of capital account restrictions. these are all welcome moves and are in china ’ s long - run interests. around the asian region generally, at this stage, our sense is that economic growth is continuing at about its trend pace. all countries will be watching closely both developments in china and the impacts on capital flows and risk - pricing as the fed tapers and other major central banks implement their own chosen policies. turning to the australian economy, i continue to find a fascinating divergence between the views of foreign observers, especially in asia, many of whom say to me “ australia is doing very well ” and the tone of the commentary at home, which is typically a lot more pessimistic. my reading of the actual data is that they suggest that the economy has been doing a bit better than much of our domestic commentary over the past couple of years would have you believe, but not quite as well as many foreign investors seem to have thought. australia certainly weathered the financial crisis well, and with a real gdp some 13 per cent larger than it was at the beginning of 2009, compares well with many other advanced countries. it is the case, though, that growth while positive, has been running at a pace a bit below its trend pace for about 18 months now. the rate of unemployment has increased by something like a percentage point over the same period. most people are familiar with the fact that there have been very strong conditions in the natural resources sector. the biggest positive terms of trade shock in at least a century drove a mining investment boom of truly epic proportions, and that added a major impetus to demand in the economy. but the terms of trade peaked about two and a half years ago ; the capital spending by the resources sector has also now peaked and is expected to decline significantly over the next couple of years. in the rest of the economy, households have spent most of the

ajith nivard cabraal : harnessing sustainable growth in emerging markets keynote address by mr ajith nivard cabraal, governor of the central bank of sri lanka, at the 2nd world management summit 2008, karachi, pakistan, 11 march 2008. * * * as salaam aleikum, ayubowan, good morning. mr. chairman, distinguished delegates, ladies and gentlemen, at the outset, i wish to thank the organizers of this world management summit for inviting me to deliver the keynote address. i am also greatly touched by the wonderful hospitality accorded to me in this very interesting and historic city of karachi. mr. chairman, i consider it a privilege and honour to share my thoughts and views on a very timely topic, “ harnessing sustainable growth in emerging markets ” at this important forum. i hope i would be able to plant a few seeds in your distinguished minds so that such seeds may be nurtured by you in your deliberations to follow. as a first step, let us examine the current global and regional trends in relation to world economic growth, so that we could deal with this topic in a wider perspective. as we know, over the past few years, the global economy has been experiencing one of its ’ strongest sustained periods of growth, since the early 1970s. this expansion is projected to be very strong even after accounting for the impact of the recent financial market turbulence. significantly, this growth has, as its foundation, the strong results of the emerging markets which have been leading the way. in fact, during 2007, china ’ s economy grew by over 11 per cent and it made the largest contribution to global growth. india grew at more than 9 per cent and russia at almost 8 per cent. these three countries accounted for onehalf of global growth over the past year, while several other developing countries also maintained their own robust expansions. in fact, the rapid growth in these countries counterbalanced the moderate growth in the united states and other advanced economies. the current global expansion is remarkable in several ways. first, emerging markets and developing countries are now accounting for a high share of growth – more than twothirds, compared with about one - half in the 1990s ; second, the successes arising from rapid growth are not being enjoyed by a few countries only – most countries and regions are doing better in comparison to their own past standards ; and, third, the volatility of growth has declined substantially. for example, the sri