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Published on January 26, 2008

Dr Christopher McNally, a China specialist with the East-West Centre, emphasised the need for a new global institutional architecture, able to absorb China's new economic powers.

"China is a country with an immature financial system with a currency controlled by the state," McNally said.

"The world will soon be faced with a massive political economy that is a developing nation," he said. "I would predict that global institutions

are inadequate to deal with this."

Speaking at a conference hosted by the East West Centre in Bangkok recently, McNally also said that China should be a "responsible stakeholder" in world economic and political affairs, and global institutions needed to be willing to accommodate it.

"Rights are always linked to responsibilities," he said. "China needs to have more rights, but established powers are not willing to let a new power in."

McNally, the editor of a recent book on China's political economy, highlighted differences between China's version of capitalism and that of the United States.

"Sino-capitalism relies on informal business networks rather than on legal codes and transparent rules. Also, large Chinese companies are heavily dominated by the state."

Five state-owned Chinese companies, including PetroChina and Sinopec, are ranked in the top ten largest companies in the world in terms of market capitalisation.

To avoid future conflict between the different capitalist systems, McNally said US and Chinese policy-makers needed to cooperate and contemplate new solutions to the world's problems.

He also argued that a paradigm shift in the Chinese Communist Party's thinking was necessary to solve mounting ecological problems and social unrest within the

nation.

"The linchpin of China's political system is economic growth. The workings of this current system are unsustainable.

"All large governments are constitutional governments. The only way to develop healthy regulation is to create institutional certainty and predictability, and for that you need a balance of power."

Danielle Kirk

The Nation