Moreover, risks that operators seem to be managing well individually may prove to be a considerable strain on the financial system as a whole. As a response to this, a new macroprudential surveillance framework is now in the making. 4  BIS central bankers’ speeches  Norway, which is in a surplus and net asset position, faces some particular challenges. As investor and manager of the Government Pension Fund Global, we have seen that prices and yields can react strongly to uncertainty about the future. New steps in the management of financial wealth Norway invests a large proportion of its petroleum revenues in international equity, bond and real estate markets via the Government Pension Fund Global. The fund is fully integrated with the government budget, and the same priorities are imposed on spending from the Fund as on any other government spending. Today, the value of the Fund is around NOK 3.5 trillion, or about 170 percent of mainland GDP. Chart 5  The Fund should be invested with a view to maximising future purchasing power. At the same time, investments must be diversified in order to reduce the risk of losses also during periods when markets are shrouded in fear and uncertainty. BIS central bankers’ speeches  5  Chart 6  The world’s economic geography is changing. While growth in advanced economies has been weak and is slowing, growth is robust in Latin America and Asia. Several countries in Africa are now catching up. The Fund has considerable ownership interests in Europe.
Many Emerging Market Economies (EMEs) have had a wealth of experience in the mismanagement in their macroeconomic, fiscal and monetary policies, and all of them had paid a heavy price for their past mistakes. The fact that the latest series of crises erupted in the developed world does not mean EMEs are immune from the spillover effects. More fundamentally, the Emerging Market Economies, including Hong Kong where household debt to GDP ratio saw a record high, must learn from the latest mistakes of the developed world and take extra care in not getting into the mind-set or habit of spending beyond our means, whether at the household, corporate or government level. Hong Kong should in particular guard against the temptation of “collective irresponsibility” by pushing for or condoning public policies that entail spending that cannot be sustained in the medium to longer run, or else we would be mortgaging the future of our children and grandchildren. This again is easier said than done, and requires considerable wisdom of Hong Kong people and the courage and skills of our leaders to resist increasing pressure and temptations for unrestrained public spending. Hong Kong’s population is aging, and aging fast. At present, the elderly  BIS central bankers’ speeches  5  dependency ratio of Hong Kong is 5:1. This means that Hong Kong now has 5 persons within the age group of 15–64 supporting each person over the age of 65.