The phrase is included in the article "the Speech during the Shanghai visit" in the Selected Works of Deng Xiaoping, Volume 3. ("视察上海的谈话"，《邓小平文选》第三卷)  2  BIS Review 98/2006  (now equivalent to over 40% of GDP) into the hands of those who need funding to finance consumption, investment and other economic activities. Currently, domestic savings on the Mainland are mostly trapped in the banking system earning fairly low rates of interest and as a result sustaining or even increasing a savings rate that is already far too high. There is a serious lack of diversity in investment opportunities. The ability of the banking system to allocate funds in accordance with the credit-worthiness of the borrower, although improving, is still not quite efficient in view of the relatively low degree of market orientation in credit allocation. Thus, the overall effectiveness of the financial system on the Mainland in the important task of financial intermediation is not high. There is, of course, room – and there are concrete plans – for improvement. But meanwhile the financial intermediation needs are there and have to be satisfied. This is where, quite clearly, the other financial system of the country can come in. As reform and liberalisation of the financial system on the Mainland continue, allowing the greater play of market forces, there is a need to conduct experiments in specific areas of activity in finance, including currency convertibility. The free market environment of Hong Kong provides the ideal laboratory for conducting such experiments.
More broadly, the developed financial markets, including derivatives for managing interest-rate and exchange-rate risks, a critical mass of financial institutions and a large investor base, support the growth of the debt market. This brief comparison will, I hope, bring out quite clearly the size, sophistication and efficiency of Hong Kong’s financial system in the context of the country as a whole. It should also give some indication of the actual and potential utility of the financial system of Hong Kong to the country, in contributing to sustainable economic growth and development on the Mainland. It was also Deng Xiaoping who coined another memorable phrase. He said that: "finance is very important; it is the nucleus of a modern economy" 3 . Indeed, the future path of the economy of China depends crucially on how matters concerning money and finance, currency and exchange are organised. To sustain the current rapid pace of economic growth and development, what China needs now is an effective mechanism for financial intermediation for the Mainland – a mechanism to mobilise the huge amount of savings  2  The responsibilities of the Monetary Authority are laid down in the exchange of letters between the Financial Secretary and the Monetary Authority on 25 June 2003. The letters can be found on the HKMA website. (http://www.info.gov.hk/hkma/eng/press/2003/attach/20030627e3a1.pdf). 3  The phrase was used by Deng Xiaoping during a visit to Shanghai in the spring of 1991, when the central government decided to develop Pudong into a modern financial centre.