The greater use of RMB in international transactions will be closely related to China’s financial reforms and liberalisation, with new fund flow channels being opened up in RMB. For example, the RMB QFII scheme allows offshore institutions to use RMB funds to invest in Chinese capital markets, and it is a new channel in addition to the US dollar-based QFII scheme. And further to a recent relaxation, outflows under the QDII scheme can also be made in RMB. Such developments, in turn, will bolster the use of the RMB in trade, foreign direct investment and international transactions, thereby supporting the further development of the offshore RMB market. 13. While recent developments in RMB have been exciting, given the possible scope of future expansion, we are probably still only at the early stage of what could be more significant changes in the years to come. After all, RMB deposits and bonds outstanding in the offshore market only account for about one percent of onshore deposits and outstanding debt respectively. The possibility for expansion remains substantial. 14. One of the aims of the Hong Kong-London Forum is to assess what all this means to the financial institutions and to corporates — many of whose representatives are gathered here today. 15. For corporates, especially those already having business links with China, it is important to get prepared for the increasing use of RMB as a currency for transaction, financing and investments.
A key initiative in this regard is the Financial Sector Assessment Program (FSAP), a health check-up of national financial sectors made in collaboration with the World Bank. Switzerland volunteered to undergo such a check-up in 2002. Once more, it was a useful and gratifying experience to interact with outside experts. And the reason I am saying this has nothing to do with the fact that the Swiss financial center came out of this surveillance exercise with very high marks. 3. Financial crisis resolution  Let me now turn to the second part of my presentation, the Fund’s role in crisis resolution. Here I have no direct Swiss experience to report on since my country, fortunately, never had to resort to financial support from the Fund. I will therefore speak from the perspective of a medium-size shareholder that believes that financial crises are market failures with potential systemic risks and that the Fund can and should play an important role in resolving them. The nature, scale and spread of financial crises have changed dramatically since the Tequila turmoil in Mexico in 1994. Financial integration and capital account liberalization brought about a huge increase in financial flows. Emerging economies did benefit from this new reallocation of international savings and some staggering economic results were obtained (annual GDP growth between 1986 and 1996 for countries in South-East Asia averaged close to 8 percent). However, the new financial setting also made emerging countries particularly vulnerable to sudden changes in market sentiment.