The best system in the history of human kind

"Our financial industries are not so much internationalized and thus not attacked severely," a commentary on the official website of the state-run Xinhua News Agency said. "Although the nine listed banks ... hold some Lehman Brothers-related assets, the amount is relatively small, which will not have a big impact [on the financial industry]. [1]

"In the past, China has been blamed for the low-degree of internationalization of its financial industries. Now it seems we are profiting from this 'fault'," the commentary said.

Many Chinese economists share this view. "Our not-fully-open financial system and not-fully-convertible currency saved China from being rattled during the 1997 Asian Financial Crisis. And now again this seems to be a strong dam to protect us against the current financial tsunami," an economics researcher with the Chinese Academy of Social Sciences (CASS) said.

What is happening in the free economic world is reinforcing Beijing's belief in its gradualist approach toward liberalization of the Chinese currency and opening up its financial markets.

"China doesn't have a timetable for yuan liberalization, though it has progressed gradually toward this goal. But under the current circumstances, it is inevitable for China to slow down the pace in this regard so as not to import systemic risks into our financial industries," the CASS researcher said.

Before it gains a full understanding of such systemic risks in the US, the Chinese government will have to slow down its market-oriented financial reforms.

"It is evident that the financial industries cannot become entirely market oriented. The semi-market, semi-government-control system may prove a better [system]. The problem in China is that the part of government control is too big and thus reforms are needed to deregulate."

In early September, Steven N S Cheung, a Hong Kong-born Chinese-American economist living in exile in China, being wanted by the US government for alleged tax evasion, claimed that China "has formed the best system in the history of human kind".

Beijing is expected now to shift its aim of financial reforms to seek a balance between market and government control, rather than simply emphasizing market-oriented reforms. As Hao Bin, director of the China Securities Regulatory Commission's research center, wrote, "We must seriously study the Wall Street crisis to draw a lesson. We must also be fully aware of our own national circumstances ... and prudently make financial [changes] to strengthen risk management. From an early stage, market development has been pushed forward jointly by the government and market forces. There is no absolute freedom and no absolute regulation; a balance between the two is needed for the healthy development of financial market."