Source: China Daily

03-27-2009 16:38

The most important role China can play on the international stage is to deal with protectionism and global imbalances, while domestically China should use public expense to bolster domestic demand, said Stephen King, Group Chief Economist of HSBC.

"I think the first thing China can do as other countries should be doing is to fight against protectionism, or its many forms," King told China Daily."That means not just from a trade perspective, but also protectionism from capital perspective."

Avoiding protectionism is one of the key issues that should be addressed at the upcoming G20 summit, King said, as continuation of the past 30 to 40 years of globalization depends on the free flow of trade and capital across the border.

"If those flows dry up, not just trade flow but also capital flow, it will be damaging to the global economy, and it is particularly damaging to some of the emerging markets, including China," King said.

As each country tries to defend its own interests in a worldwide economic downturn, signs of protectionism can be detected in many different shapes and sizes.

The second thing China needs to do, according to King, is to have a frank discussion with the US about the global imbalance.

"In fact, global imbalance has made some kinds of indirect contribution to the crisis; for instance, the distortion to capital market pricing which has contributed to the scale of the financial crisis," said King.