such a complex and volatile market it is impossible and uneconomical to rely on one or a couple of real estate financial institutions to collect and analyze all the information needed for lending decisions. therefore, relevant parties shall take an active approach to foster a sound policy and legal environment and nurture an independent, fair and standardized institutional framework of specialized intermediary service agencies that adapt to modern financial system. specifically speaking, first, efforts shall be made to foster and develop a number of intermediary service agencies with sound competence and professional integrity, such as credit rating, asset and project evaluation, property and specialized project consulting agencies. second, relevant government departments shall also set up and develop consulting, evaluation and service agencies in response to the needs of market growth so as to provide specialized, rapid and efficient public services to the market in the areas of collecting, processing and publishing information. only when independence and advantages of those specialized institutions in mining market information and building market discipline mechanism be brought into full play, can capabilities of real estate financial institutions in risk analysis and management be improved effectively. third, the establishment of information network of real estate and finance shall be speeded up to push forward the computerization of transaction, settlement, management and surveillance. iii. strengthening policy guidance and regulation and improving legislation to promote healthy and orderly development of the real estate financial market. 1. strengthening supervision over the real estate financial market and standardizing financing behavior of real estate enterprises. efforts shall be made to enhance supervision of property lending as well as to continuously support growth of the real estate sector. drawing on the historical lessons of non performing loans buildup when credits were highly concentrated in the processing industry ( such as refrigerators, color tvs and washing machines ) in early 1980 ’ s and the real estate sector in early 1990 ’ s ( the real estate bubble in hainan province and in beihai city of guangxi province ), close attention shall be paid to the issue of real estate lending concentration so as to guide commercial banks to expand other lending businesses in a timely manner. meanwhile, real estate credit management shall be strengthened to investigate and punish property lending irregularities and intensify risk management and prevention. 2. working out relevant policies to create a sound external environment for the development of real estate finance. first, regulatory agencies shall explore rational and effective supervisory approaches to keep up with the market developments. second, property lending structure shall be adjusted to improve the operation mechanism and build a diversified, multi - tier and competitive institutional framework

significantly to enabling price stability to be maintained. as the riksbank's monetary policy is guided by the development of inflation one to two years'ahead, the inflation rate is sometimes allowed to deviate from the target in the short term. if monetary policy were aimed at continuously minimising these deviations, it could require major adjustments in the steering interest rate, which would in turn lead to large fluctuations in production and employment. this was the reason behind the decision not to try to achieve the inflation target of 2 per cent as early as 1993 and 1994. we chose instead to allow the first effect of the increase in import prices that followed in the wake of the floating krona to have an impact on the system first and to accept a temporary and limited rise in the inflation rate. what we wanted to avoid was the second round of effects. it is also for this reason that we have tolerated a'deviation interval'since 1995. while inflation has been low, growth in both sweden and finland during the inflation targeting period has been good from a historical perspective, and unemployment has fallen gradually from the high levels during the crisis years. there has been a successful consolidation of public finances in both countries and a fall in the central government debt measured as a percentage of gdp. additionally, fiscal policy in sweden has become more predictable with the introduction of a rolling nominal ceiling for public expenditure. moreover, a number of measures have been taken to improve the functioning of the swedish economy. these include deregulation and changes in the tax and social insurance systems. this has meant that the conditions for a favourable development have improved and confidence in the swedish economy has increased. at the end of 1996 ; however, finland chose a different direction for its exchange rate policy by taking part in the erm as a preparation for full participation in the emu from its start in 1999, while sweden decided in 1997 that it would'wait and see '. however, an unforeseen obstacle over the past decade has been the large fluctuations in the exchange rate. from an international perspective, these fluctuations have not been greater than those experienced by other countries with a floating exchange rate, but they have played a prominent role in the swedish debate and have probably been discussed here in finland too, bearing in mind our close trading connections. let me say here that while the variations in the exchange rate have been larger than we anticipated, the effects of this volatility have been much less than might have been expected. our central bank and many