With the Washington summit on the financial crisis less than a week away, China has signaled its intention to take a bigger global role by advocating a "fair, inclusive and efficient "financial system.
But it's unclear how that intention might play out amid the deepening financial crisis.
Morgan Stanley Asia Chairman Stephen Roach told Xinhua that the goal of revamping the world financial architecture would be to establish a more robust framework to temper the "worrisome" global imbalances triggered by the enormous disparities in savings and current-account positions.
"The United States and China both need to play a major role in reducing their respective shares of this problem," he said. "America needs to save more and China needs to save less. Easier said than done!"
The past 30 years have seen China rise from a tangential role in the world economy to a powerful growth engine, but, with its large trade surplus, the world's fourth-largest and Asia's second-biggest economy has also became a protectionist target for many, especially in Washington.
"It will now be up to Barack Obama to say 'no' to China bashing and 'yes' to globalization. But it will also be up to China to provide greater impetus to private internal demand -- in essence, a structural shift that could well help to defuse anti-China protectionist sentiment in the United States and elsewhere in the West," Roach said.
It's unclear what China might propose during the Nov. 15 summit, which leaders of the Group of 20 largest industrialized and emerging economies will attend.
But according to Vice Foreign Minister He Yafei, China would pursue a broader role for developing countries in world financial bodies like the World Bank. It would also call for all nations to shoulder their global responsibilities while coordinating their domestic macro-economic policies with others, especially developing nations.
Rate cut coordination
In early October, China joined other G-7 central banks in a rare coordinated interest rate cut. "That represents an important shift for China, moving away from acting solely for domestic purposes and accepting greater responsibility to act for broader global purposes," said Roach.
Strained by fiercer world competition for capital, labor and resources, policy makers everywhere tended to be more concerned with their domestic interests rather than those of the world.
Following the outbreak of the financial crisis, however, the necessity of coordinating domestic policy actions with those elsewhere in the world has gained recognition.
"One thing is clear: today's international organizations are not capable of dealing with the financial crisis. It's important to know what needs to be done in China and what the world should do," Dalia Grybauskaite, European Commissioner on Financial Programming and Budget, told an audience at the University of International Business and Economics here last Friday.
She said that the Washington summit would be "very much strategic and political" in showing leaders' eagerness to coordinate and approach problems together. Later in France, a ministerial-level working meeting would be held between China and the European Union to sort out technical issues.
Recognizing China's growing economic and financial influence, she said that the world could not solve global problems unless Beijing took on more responsibilities and internally sustained its high growth and stability.
Classical views don't work
"In classical terms, [an economic] crisis is often a U-shaped. But it's very possible for the world economy to go L-form, featuring stagflation -- low growth and high prices -- where classical textbooks don't work," she said.
There would be no one-size-fits-all, she said. Creativity, imagination and political responsibilities would be crucial for all nations, big or small, as no nation alone could survive.
"The downturn is very visible in the United States and Europe. It's no good pointing fingers. Everybody is in trouble."
Grybauskaite was here last week to exchange views with Finance Minister Xie Xuren over the role of fiscal policy in addressing financial crises.
Although she didn't want to get too involved in China's internal challenges, she briefly touched on tax reform plans to tackle domestic imbalances and the inefficiency of capital use at the local level.