System. I wont say too much but it is one of the hottest topics around and most important topics around. Of course theres china but theres the whole of asia. And i think the Financial System as weve all learned is one of the absolute requirements for growth. Deputy managing director min zhu was previously adviser to the managing director, senior adviser, and he was the Deputy Governor of the bank of china, and before that, chairing a working group on financial issues. So there is few i think in the world, if any, who knows more certainly about the chinese Financial System but now about the whole world Financial System than min zhu, our friend min zhu. And he makes us an honor to come to brookings for this event. So thank you very much. I will cede the floor to him. After his remarks the panel will i will introduce the panel and we will have some further remarks from two colleagues from the fund, from our own eswar prasad. I will then launch a discussion where we will go from a Panel Discussion first to then having some questions from the floor. Deputy managing director min zhu, please, and thank you again. [ applause ] thank you, kemal dervis, for the kindness of your introduction and also for your warm hospitality. To hold this event. I think its wonderful for us to come to this place, to bring this book to the audience and also its a great honor for me to be here, to speak to this very distinguished audience as well. Thank you, kemal. I just realized one thing when i walked in. I thought the brookings has very good Budget Resources so probably will provide everybody a free copy of the book. I am always very aware of budget constraints. But i realize there is a bookshop there. So everyone, hopefully after this session, will go to the bookshop, line up. I cant afford to give everybody a book but i probably can afford to give everybody who purchases the book a certain degree of discount of the book. Once again, thank you very much for coming to the session, in the cold weather, as kemal mentioned. Im going to have sort of a background information, to set the past for the full set of discussions that the authors will be on the podium to discuss the whole issues. Let me talk about a few things about the Asian Financial market. The market grew very strongly and fast. If youre looking here, the Asian Financial shares and Global Shares really increased around 5 to 18 from 2002 to 2013. This is a big, big challenge. Its really big. If you see, it went from 6 to 23 , thats Global Shares. You will see the Asian Financial sector is really gaining market share in the past ten years in a very dramatic way. If we add everything together, add japan to it, as a whole, arab is 28 of Global Financial assets, which is quite a bit. And the growth is very impressive. But overall, this 28 is still below the asians gdp percent share in the whole world, which is 33 . And then you also see the biggest structure is very much banking. You see in the emerging asia, also in china, the emerging asia, the Banking Sector gdp is roughly 183 . And before, 129 . But the equity market is only 76 gdp, and the debt market is 52 . This chart will tell us the asia Financial Sector, number one, strong growth in the last ten years, really grow strongly, particularly emerging asia from 5 Global Financial assets to 18 china, from 2 Financial Assets to 10 today. If youre looking structurally, very much a focus on the Banking Sector, still practically slow. By looking further, the whole Financial Sector with very strong growth in the past ten to 15 years. Still below asian gdp shares. Theres still room for continued strong growth. If you put asia in the global picture, its also very interesting. jutausqt positions. This is the capital inflow to asia. In the ten years from 2005 to 2015, asias International Exposure increased dramatically. Asia sports exports 17. 5 trillion. The regions International Exposure also increased dramatically. 10 trillion ten years ago. Today, 20 trillion. Also, asia imported this amount. So, International Exposure also increased dramatically. But most interesting is here. This means how much asia export capital, how much asia import capital. That is 1. 3 trillion. So at the net, asia exports a lot of capital to the whole world. Now, thats also very interesting chart. The chart says asias International Exposure increased dramatically in the past ten years. Net to net, asia export, roughly oh, they asked me to not step away from the mike, i guess, i have to be here. Okay. Usually this is a disciplined place, but i tend to move around. Brookings is a much more disciplined place, i realize today. So you see, net to net, asia exports so far 4. 35 trillion to the whole world. The question is how asia can utilize this next export capital for the region. I think thats a big issue. Because of that, asia exposed to the international scale. The advanced economy to emerging asia, its quite high, roughly from 50 equity returns, equity positivities. Today, its roughly still around 50 . So asias equity market movements, roughly 50 is associated with advancing economies spill over. If youre looking for today, china, when china become bigger and bigger, chinas Financial Assets from 2 global share to 10 global share and also china played a bigger role. And china spent also have a big player for the region as well. We compare, its very interesting, in this chart i cannot move, im sorry and the blue bar is the u. S. Temporary impact for the region, for the equity market movements, and the returns. And the red bar is roughly the august episodes, the Financial Impact from china in august last year. If you compare the two things, you will see there is malaysia, indonesia, india, and you will see on the currency side, china have quite a bit of impact to the region, almost equivalent to the united states, particularly on the equity sides and movement sides. And china today have even big impacts compared with tapering impact in 2013. Now, thats also become the new feature of the whole Financial Sectors are facing today. Now, this is very much the system, if i provide some artificials in the few slices. The real economy is changing. The whole region changing in a very dramatic way. The first issue is demographic change. You will see the red line is for japan. You will see japan, in 30 years horizon, 15 years, that people aging over 65 really increased from 60 to 32 , double in 30 years. So we all move to aging. Also if youre looking at the soft careers, the blue line, you will see almost a vertical increase in the next 10, 15 years, roughly from 6 , 7 , increase to 24 . So almost a fourtime aging increase. This is absolutely stunning demographic change. If youre looking for china, the brown line, also from 6 increase to 16 , to the horizon. The black line is for the whole world. To compel the whole world, were all getting older in the in demographic structure. But asian getting older faster. And stronger. This is the big fundamental change, because when youre getting older, you will start today longing for longterm investment instruments. And you can move forward to the equity market and the Banking Sector may not necessarily provide enough product to serve aging people and aging prop lagss this is a profound driving force will shape the Asian Financial market. And structure. In the future. Given the steep of the curve is so big and is really moved very strong and fast. As a huge financial gap in asia. This is the u. N. And calculated to meet sdg requirements, how much money asian needs. Last year is the year for development because we had the year of sdg replace ndg and we have Climate Change and finance for developing the artist. But to the region we realize, in the next ten years, every year asian need 96 billion to fill the remaining table for mdg. Education, health care and other things. Need another 323 to fill the gap for People Living under 2 per day and need another 718 billion per year for Infrastructure Investments. All Financial Sector can help. To mobile the resources, from public to private. Its a 1 trillion challenge for one year in asia to immediate stg target. Its a big challenge for asia Financial Sectors. Meanwhile, if were looking further, theres even more tougher challenges the region facing. We are pulling the full major economy, china, japan, korea and taiwan together we see how much they contribute in the growth. Usc take a career case, as a dark line, because clear, the contribute gross, 3. 5 and the gross to. 5. And down to less than 2 . Japan, the red dot line also see the same thing. China kept contributing to growth drop even faster. Thats means with heavy investments and capital return. Particularly margin of return drop faster than you expected. And because the capital contribute to the growth. The down panel showed the productivity contribute to growth. Also drop quite a dramatic ways, you will see the dark line creeia the career productivity increase in the first ten years and on all the way down, gross to roughly less than 1 , contributing to growth and those years and also you see japan, the productivity grows very strong in the first 15 years and drop. The productivity growth remain high less than 4 , drop dramatically in the past five years on because the capital efficiency, and the productivity because the imd, innovation and things stored under there. What does this tell us . This chart tell us that asian facing a fundamental challenge thats to improve the productivity, to raise the productivity growth, to raise the potential growth. As also mean to support a Service Sector, particularly when the region getting mature move to Service Sectororiented economies, to support a Service Sector productivity. Which the key challenge in the Financial Sector should and could play a very Important Role in this area. But i have to say this is not easy. This is not easy. For Financial Sector to support ind, to support innovations, to support a startup, more sort of Venture Capital type of things, to become more flexible, to support the growth, to support sustainable growth. Thats a real challenge. Last, not the least, and theres inclusion issues in asia. Osc in the region. In the asia adult have the banking account, yes increase from 2011 to 2014. Roughly from 32 to 46 , but still only 46 so way, way low. Half of people in the south asia do not have a banking account. And even in the east asia we say roughly 30 still dont have a banking account. Theres quite a bit of room to improve the inclusiveness in the Financial Sectors. We all know today, the Financial Inclusion is a very important drive for us for sustainable growth. Because you provide financings for individuals, for the smes, for the poor families. Which will bring the productivity and the support the growth. So Financial Inclusions also another very important issues. So bring them all together theres a few recommendations, that we are looking for the future. Current structure in the future and enhancing financing deepening and integrations, while building resilience and strengthen policy coordinations in the region. This is very broad. So let me bring them together. Whats the story . I think the story just a source of very few, seven to eight slices i try to say is number one, the Asian Financial sector gross strongly in the past ten years. For example, china was up 2 of all financial asset to 10 , roughly to the 28 , from 10 . Really strong growth. And theres still room for the future because still the Financial Assets is below gdp shares in the whole world and structurally still remain a banking focused and neither develop on the equity market and the bonds market as well. And the region export 4. 35 trillion dollars to the whole world. And the region imported 20 billion and export 17 trillion. Which clearly put the region under huge International Exposure. And when china become bigger and bigger and chinas Monetary Policy and the Market Movers have spirling for the region as well thats the Financial Sector. But with demographic change, i think thats a big one. With infrastructure insemt need day by day and and the way the whole economy structure moving into the more innovative. More service and productivity, become more and more important and with Financial Inclusion still have a huge gap to fill in the future Financial Systems for asia. Have to look into those issues. Have to meet these challenges. And we saw this study try to understand what is the Asian Financial structures, understand what the area we can do, we should be able to catch up and what policy need for the region. After two and a half years, hard workers have produced beautiful books with red color on the cover. So thats the one. But i dont know why they tied money. They should free the money. I think thats the whole thing. And thank you once again, coming to this session, i hope very much you will enjoy the book afterwards i hope you will buy the book. Thank you very much. [ applause ] so mr. Shakasumi will compliment the marks of mr. Win ju. Hes the assistant director of the asiapacific department and has headed this Financial Sector project. Previously served as deputy vice minister of finance for International Affairs and Deputy Commissioner of the Financial Services agency for the government of japan. And shin huang lymph, she reviews the Department Financial surveillance work and serves a as mission chief for canada. Canada is one of the successfuls financial countries, i guess, right . Is that . Very much so. But you can always get better. She has had 13 years in the Capital Markets department of the imf where she worked on financial crises and sovereign debt issues, including sovereign debt restructuring and the development of analytical tools to assess systemic microfinancial risks and bank soundness. She is known for working on the effectiveness in many ways of microprudential policies. Which as you know is one of the big topics in Financial Market analysis these days. And then we have our own answar prasad, we share him with Cornell University where hes senior professor of trade policy. But hes more fundamentally anchored at brookings. And he is a senior fellow in the Global Economy and development department. And the new century chair in the international economics. Hes an associate of the mber and he was at the fund before chief of the financial studies division. And head of the imf china division. I think we couldnt have hoped for a better panel. So which one of you wants to start . I think its going to be me. All right. Well, thank you very much, mr. Dervish, good afternoon and welcome to this seminar. Mr. Chu has given awe very nice overview of the book. I would like to pick up on one Important Message from his remarks. And that is, asias Financial Sector still has room to grow and it will evolve to meet the needs of the future generation. That could be for infrastructure financing as he mentioned. Or it could be to mobilize for an aging population. Or managing a higher volume of crossborder trade or capital flows. So it is very likely that you will see asias Financial Sector become bigger, more complex, and more interconnected. Now in my next five to ten minutes that ive been given, i would like to talk a little bit about the importance for asia, to anticipate and prepare for these changes. And i will speak from a regulatory perspective. In our view, understanding new products, new markets and new risks, will help asia build resilience. How can asia best do this . How can it best prepare for the changes that are coming . Lets look at what asias strengths are and area where is it still needs to work on. What are asias strengths . Asia has strong and well capitalized banks. It has relatively large provisions for nonperforming loans. Asia has good compliance. With International Regulatory standards. Most Central Banks have a framework to monitor Systemic Risks through pack roh opinion prudential supervision. And asia has relatively robust Crisis Management