Such a scheme would be justified as one which reallocates resources from current to future consumption, and the reallocation would occur only during a time of relative prosperity. 5  See F. Holme-Hadulla, S. Hauptmeier and P. Rother, “The impact of numerical expenditure rules on budgetary discipline over the cycle”, ECB Working Paper Series No 1169, April 2010; see S. Hauptmeier, J. S. Fuentes and L. Schuknecht, “Towards expenditure rules and fiscal sanity in the euro area”, ECB Working Paper Series No 1266, November 2010. BIS central bankers’ speeches  7  While this on its own would not ensure the sustainability of the pension system, it would be an important component in the process of pension reform, and, as I have already mentioned, I would suggest that it would be appropriate for deliberation at the MCESD. The phenomenon of population ageing raises sustainability challenges also for the public provision of healthcare, which represents a significant share of government expenditure. It must be recognised that the extent of provision of free healthcare and other services by the State must ultimately be financed by the taxpayer. The earmarking of certain revenue measures or particular revenue streams for this purpose may also be an appropriate topic for consideration by the social partners. The sustainability of funding the government’s capital expenditure programme, particularly in relation to the infrastructure and the public utilities through fiscal resources may also have to be reviewed.
We expect that this will help boost the demand for fixed income securities although we do not know exactly how much such investment outflows will be approved by the Mainland authorities in the initial years. 2  BIS Review 56/2006  Given our experience and achievements in financial services and the fact that we are the only international financial centre of China, I am sure that Hong Kong is well positioned to grasp the opportunity. Apart from the initiatives and developments I just mentioned, I believe that it would be useful to highlight a few fundamental factors which make Hong Kong an ideal place for the bond market. The first is our free capital mobility. The absence of capital controls means that there are no restrictions on foreign enterprises using our capital markets to raise funds. Foreign investors can also freely invest in our markets and easily remit the proceeds back home. Secondly, our well-developed financial markets, including derivative markets, would allow issuers and investors to manage any interest rate risk or exchange rate risk effectively. Thirdly, Hong Kong has a critical mass of financial institutions which stand ready to support issuers to tap the capital markets. Hong Kong is also an asset management centre thus providing a large investor base for debt instruments. Last but not least, the absence of capital gains tax and interest withholding tax would also favour bond market development.