peter pang : economic and financial outlook for the asia / pacific region welcome remarks by mr peter pang, deputy chief executive of the hong kong monetary authority, at the launch of the international monetary fund ’ s regional economic outlook, hong kong, 28 april 2014. * * * 1. good afternoon. it is my pleasure to welcome all of you to the launch of the latest issue of the imf ’ s asia and pacific regional economic outlook. we are honoured to have mr. changyong rhee, director of the asia and pacific department of the imf, and his colleagues to share with us today their views on the region ’ s economic and financial developments, the outlook and the challenges, and what can be done to manage the risks and promote further growth that is sustainable over the years ahead. 2. i totally agree with the theme of this issue of the reo – sustaining asia ’ s high growth momentum would require continuing vigilance and reforms. there is little doubt that asia will continue to grow faster than most other regions in the world. since the asian financial crisis, policymakers have implemented many structural reforms making the region more resilient. asia has also been leading the world recovery after the global financial crisis. having said that, asia cannot afford to feel complacent as the road ahead is bumpy. and we will be in unchartered waters when the high tide of global liquidity starts to ebb as the developed economies embark on the normalization of their monetary policies. we should get well prepared or would lose the momentum quickly. 3. exit by the u. s. fed from its unconventional monetary policies is one of the most important external challenges that the region will face in the next year or two. a timely and orderly normalisation of monetary policy in the us should help to slow credit growth and contain asset price inflation in the region. however, a disorderly normalisation process could lead to significant outflows of capital, abrupt tightening of financial conditions and a severe re - pricing of assets. this can result in financial instability and even a sharp slowdown of economic growth in the region, particularly in those economies with weaker fundamentals and higher reliance on external financing. yet, there is a lively debate about the size of the labour market slack in the us, which could complicate the judgment about inflation risks and the conduct of monetary policy. indeed, the path of exit is not necessarily smooth, and interest rate volatility could be higher than

widening of the access to the china interbank bond market to a broad range of foreign financial institutions without any quota restrictions. • and, earlier this month, the bank announced that it would extend nationwide the pilot measure for cross - border financing by mainland corporates and financial institutions, with the result that case - by - case pre - approval is no longer required. 12. these initiatives demonstrate the central government ’ s commitment to liberalising the mainland ’ s capital accounts. they also present cfos and treasurers with new opportunities to meet their business and investment needs. and, there will be more to come. premier li keqiang has said the shenzhen - hong kong stock connect will be launched later this year. 13. secondly, the “ china connection ” is growing rapidly. let me briefly explain what i mean by this : in 2014, china ’ s odi amounted to us $ 123 billion, 10 times the amount in 2005. this number will be even bigger in the years to come as chinese corporates go global, and as the implementation of the “ belt and road ” strategy helps more chinese corporates to invest in these countries. at the same time, multinational corporates are paying more and more business attention to china. in 2015, fdi into china reached us $ 126 billion, compared to us $ 72 billion in 2005. the point here is that with more business opportunities, either because chinese corporates are “ going out ” or multinational corporates are expanding into china, comes the need for more sophisticated treasury management. 14. thirdly, while corporates find more business opportunities, they also face even more challenges which you, as corporate treasurers, are probably well familiar with. for example, increasing market risks, where corporates operating in multiple countries are faced with growing exposures to different currencies and rates. in fact, divergent monetary policies among key advanced economies have led to greater volatility in the global foreign exchange market. and, with the international use of the renminbi on the rise, the reform of the yuan ’ s exchange rate since august 2015 has also resulted in more two - way movements of the exchange rate against other currencies. these recent developments have created more market risks. 15. lastly, global regulatory reforms have also had an impact on corporate treasury management. these reforms, particularly the higher capital and liquidity requirements under basel iii, have led to more constraints on global banks in providing funding and making a market for hedging tools for corporate