financing platform has played an important role in mainland's economic development and a continued and expanded use should be made going forward. in addition to the well developed platform for mainland enterprises to list on the hong kong's stock exchange, consideration could be given to facilitate smes to raise funds through bond issuance with credit enhancement in hong kong. at the same time, hong kong can serve as a platform for more investment outflows from the mainland, which would improve investment choices for mainland investors. for instance, financial instruments issued in hong kong could be allowed to be listed on the mainland, or mainland investors could be allowed to use their own foreign currency deposits to invest overseas through hong kong. second, hong kong can be a testing ground for the international use of the renminbi, a process closely related to mainland's capital account liberalisation. the renminbi business scheme in hong kong, which is supported by a clearing arrangement provided by the people's bank of china, has developed steadily since its launch in early 2004. it has now extended from personal banking to bonds issuance by mainland financial institutions. renminbi deposits in the hong kong banking system have also risen significantly over the last few years. further expansion of renminbi business into trade settlement and related financial services would bring convenience for traders and enterprises on both sides. more importantly, it will help to lay the ground work for the use of renminbi for trade related activities through a formal and supervised channel. the demand for a wider use of renminbi outside the mainland is likely to increase further as the mainland economy grows. in addition, the recent global financial turmoil has highlighted the need for a more diversified international monetary system, including more currency choices for international transactions. in time renminbi could be one of the obvious choices for many countries. in this process, using the well - established institutional framework of renminbi business in hong kong for pilot schemes will enable better monitoring and assessment of the flows, and mitigate the potential risks particularly on the domestic monetary policy management. one important pre - requisite for designing appropriate policies to facilitate the mainland's capital account opening is a good understanding of the economy and financial system. here at the hkma, we have closely monitored, as well as undertaken in - depth analytical work on the mainland economic, monetary and financial developments. our half - yearly financial stability report has a section devoted to the mainland economy, and research reports on the mainland are published as working papers available on

by almost three per cent. a notable development in the exchange rate of the rand during the last few months has been that it has become less volatile : the rand ’ s historical volatility – a measure based on an average daily standard deviation calculation – declined from almost 21 per cent in june 2005 to below 10 per cent in october 2005, and has remained there in the subsequent two months. 9. 1 it bears repeating the fact that the south african reserve bank ( the bank ) has been given a target for inflation : it has not been given a target for the exchange rate. of course, the bank cannot disregard the exchange rate because the exchange rate can exercise considerable influence on developments in inflation. but the bank understands that neither it nor anyone else can claim with any confidence to know the equilibrium level or time path of the exchange rate. the bank also understands that to switch focus to the exchange rate could mean losing control of inflation. 10. broadening access to financial services, targeted investment and increased economic cooperation remain high priorities on the agenda for south africa and the bank continues to monitor and support new initiatives in this regard. the bank makes a significant contribution to economic co - operation in africa by liaising closely with the association of african central banks regarding the implementation of the african monetary cooperation programme. 10. 1 in february 2005 the bank hosted a seminar with the european central bank ( ecb ), attended by southern african development community ( sadc ) central banks in which views on the road towards a single central bank for sadc were discussed against the background of the ecb experience. the mou on the harmonisation of legal and operational frameworks of sadc central banks was finally approved by ministers for finance at their meeting held on 5 august 2005 after extensive consultations. at their september 2005 meeting, the committee of central bank governors ( ccbg ) in sadc signed memoranda of understanding ( mous ) on exchange control, information and communications technology and payment, clearing and settlement systems. 10. 2 looking forward to the future, it is the case that there are promising signs that the targeted inflation rate will remain within the stipulated range. this, as my former colleague ian plenderleith noted, is not just something to look back on with satisfaction. rather, it is important to recognise that the stable framework for a normal, wellrun economy that has been achieved to date provides the foundation for sustained, if not improved economic performance in the years ahead. 10. 3 going forward