China Grapples With Bigger Role in New World Order, Zhou Says

By Kevin Hamlin at Bloomberg.com

China’s policy makers, grappling with their bigger voice on the global stage, have yet to agree on what they want from a new world financial order, central bank Governor Zhou Xiaochuan said.

“Many issues are new to us and we haven’t formed a collective opinion about them,” said Zhou, speaking at a conference in Shanghai today. “There are some scholars’ views on those issues but we haven’t reached a consensus at a national level or set any goal.”

Zhou this year has already called for the creation of a new international reserve currency and his central bank blamed the financial crisis on “complacency” and a conviction in the U.S. that markets always correct themselves. China, the only major economy among the top five globally that is still growing, wants the International Monetary Fund reorganized to give developing countries more voice.

“In the past China only dealt with internal adjustments needed to take advantage of opportunities in the world,” said Shanghai-based Andy Xie, former chief Asia economist for Morgan Stanley. “Now China faces the challenge of participating in reorganizing the world. That’s never happened before.”

China needs to think carefully about what it wants, what it stands for, and how it will participate in a remaking of the global financial order, Zhou said.

High-Profile Role

China’s fallen into its higher-profile role on the global stage as a consequence of the global crisis and it’s not prepared,’’ said Dwyfor Evans, a strategist with State Street Global Markets in Hong Kong. “Zhou’s saying to policy makers: ‘We need a coherent global strategy rather than the unilateral strategy we’ve had in the past.’”

The central bank’s research arm in March said that “market forces, if unchecked, will lead to asset bubbles and ultimately a disastrous market clearing in the form of a financial crisis like the current one.”

A lack of coordination among regulatory agencies and communication between regulators and central bankers and finance ministers in some advanced countries hampered efforts to manage the financial crisis, the research arm said.

Zhou said that the global financial crisis can’t be resolved by the G-7 alone and added that emerging economies need to have more involvement in working out solutions.

-With assistance" for Li Yanping in Shanghai. Editors: David Tweed, Russell Ward

To contact the reporter on this story: Kevin Hamlin in Beijing at khamlin@bloomberg.net