the expanding financial connectivity between the mainland and the global financial markets, with hong kong sitting right in between. starting from the stock markets, the connect family now also covers bonds, wealth management products and derivatives. and more are in the pipeline. the most exciting feature of the various connect schemes is the promotion of the wider use of rmb globally. for two decades, hong kong has been fully committed to developing our offshore rmb business. we have built an ecosystem of ample liquidity, expanding product offerings, the underlying financial infrastructure, and a talent 2 / 4 bis - central bankers'speeches pool. our hub status presents a unique competitive edge for hong kong. this is a never ending journey and the growth potential is unlimited. active engagements with market players and our mainland counterparts are ongoing to enable us to unleash and capture the unlimited potential. ladies and gentlemen, we are living in an increasingly complex world. geopolitics and the resultant geoeconomic fragmentation, technological advancements, climate challenge – all are adding to the complexity and uncertainty faced by global finance. we have no choice but embrace these changes and challenges, and ensure that we turn these into opportunities and future - proof hong kong's financial sector. take for example geoeconomic fragmentation that is reshaping the global supply chain. along this we are seeing an increasing trend of corporates including mainland companies expanding into other emerging economies and closer intra - regional economic linkages. such fragmentation, which is not purely because of economic or commercial considerations, may negatively impact the efficiency of global trades and economy. but as the saying goes, if you can't beat them, join them. hong kong is known for its agility and adaptability. our strengths in trade, logistics, professional services, and being a preferred location to set up regional headquarters, put us in good stead to play a part in this process. our financial sector is well positioned to provide trade finance and cross - border payment services, support corporate treasury activities, raise funding through the banking system or capital markets to finance investment or infrastructure projects. on technology, we don't just see it as a disruptive force – we embrace it. use the blockchain technology as an example. we leverage on the technology to explore the use of central bank digital currency to raise the efficiency and lower the cost of crossborder payments. we encourage banks to pilot the use case of tokenised deposits. we put in suitable regulatory guardrails that facilitate the responsible and sustainable development

and sophistication. this august, as you know, the hong kong financial markets became the target of a well planned attack by international hedge funds. we took unconventional actions to fend off that attack and to fortify our financial system against future attacks. not unexpectedly, these actions have been the cause of extensive controversy, and of a great deal of misunderstanding. let me attempt to present the issue from hong kong ’ s perspective by outlining what happened in august and explaining why we took action. oddly enough, hong kong became a target because of the transparency of its financial system : we were singled out for our efficiency and predictability rather than for any fundamental flaws. under our rule - based currency board system, any change in the hong kong dollar monetary base must be strictly matched, at the linked exchange rate, by a corresponding change in the amount of foreign reserves held by the currency board. this is an autopilot mechanism, in which we in the hkma have minimal discretion : the currency board simply acts passively in response to capital flows. under the autopilot mechanism, an expansion of the monetary base causes interest rates to fall ; a contraction causes them to rise. the crucial element in the monetary base influencing the rise and fall of interest rates is the aggregate balance that banks maintain in their clearing accounts held with the currency board. notwithstanding the enormous volume of transactions that goes through our banks, the aggregate balance is minimal, because our financial infrastructure is so efficient. we have a real - time interbank payment system and no reserve requirements, so that banks in hong kong do not need to maintain large balances in their clearing accounts with the currency board : in august the aggregate balance was as low as hk $ 2 billion. this meant that the aggregate balance, and hence interbank interest rates, was highly sensitive to speculative attack. we saw a series of such attacks over the past year, when various currency speculators took large short positions against the hong kong dollar with the aim of destabilizing the linked exchange rate. on all these occasions the attacks drove up the interbank interest rates to very high levels. to the extent that the speculators had to borrow in the interbank market to fund their short hong kong dollar positions, the interbank interest rates were high enough to force the currency speculators to abandon the attacks, unwind their short positions, and incur substantial losses. the finely tuned currency board system worked well, but the interest rate volatility was