AS the world confronts its gravest financial crisis since the 1930s, attention is increasingly turning to China, whose economy has been growing rapidly for the last three decades and which now holds US$1.81 trillion (RM6 trillion) in foreign exchange reserves, the most in the world.

On Sunday, a high-level meeting of the Chinese Communist Party ended a four-day meeting that was focused on rural reform but whose communiqué also touched on the global financial crisis.

“The country’s overall economic situation is good,” the communiqué issued by the third plenary session of the party’s 17th Central Committee concluded. “The economy is growing quickly and the financial sector is operating steadily. The basic momentum of the country’s economy remains unchanged.”

These words seem strangely dissonant from the panic-stricken voices emanating from Washington, London and Brussels these days. It is almost as if the Chinese economy can remain shielded from the financial storms lashing the rest of the world.

It is true that the communiqué exhorts party officials to face up to challenges from the international situation, but there was certainly little sense of urgency even amid the deepening financial market turmoil and the slowdown of the world economy.

Of course, China must look first and foremost after its own interests.

However, it must be aware that the days of its export-led growth model are over as its major markets have been plunged into a profound financial crisis.

China’s trade surplus for the first nine months of the year was US$180.9 billion, down 2.6 per cent year-on-year .

That is why China knows that it is in its own interests to extend a helping hand — if it can do so without serious damage to itself.

Last Wednesday, China joined six central banks, including the United States Federal Reserve and the European Central Bank, in cutting interest rates.

And after the weekend meeting in Washington of the International Monetary Fund (IMF), which endorsed a plan of action by the Group of Seven industrialised countries, a senior Chinese official called for international cooperation to restore financial stability.

“China is willing to strengthen its cooperation with other countries and, through such joint efforts, we hope global financial stability can be safeguarded,” said Yi Gang, deputy governor of the People’s Bank of China.

Increasingly, China and other emerging markets that so far have not been seriously affected by the financial turmoil in North America and Europe are being viewed as an important part of the solution.

The IMF predicts that reserves held by China, Russia and other emerging markets, estimated at US$4.7 trillion last year,would surge to US$6.5 trillion by the end of next year. That suggests that the emerging markets could play a major role in the resolution of the current crisis.

Already, Iceland, which did not get the help it needed from its European friends, has turned to Russia for a US$5.3 billion loan. It is entirely conceivable that other countries could tap China for similar assistance.

The Chinese financial magazine Caijing recently published an article by respected economist Andy Xie titled Saving America, in which he asserted that “every sector in America is overleveraged”.

“The solution to America’s crisis must involve the countries that own US$10 trillion in foreign exchange reserves,” he said.

“The US economy is undercapitalised.

An internal solution is usually one form of debt replaced with another.

The current proposals fall into this category.

“When the shell game runs out of options, printing money is the only way out. That will eventually lead to the US dollar collapsing and hyperinflation in the US economy.” From Xie’s standpoint, countries with big foreign exchange reserves, such as China, Japan, Kuwait, Saudi Arabia and the United Arab Emirates, should talk with the US and then “swap their US dollar assets in debt instruments like treasuries for equity assets like stocks”.

That is easier said than done.

The US is reluctant to let foreigners become majority owners of its big financial institutions. But it may discover that it does not have a choice.

As Xie said: “The US still has an unrealistic view of itself. Even though the US is the largest debtor in the world, it behaves like the largest creditor. Americans may need much more hardship to change their attitude.” As for China, it should realise that self-interest dictates that it do everything possible to help resolve this global problem. All countries are in the same boat and no one can be shielded indefinitely from its ramifications.