How the world's second-largest economy will manage its economic growth and tackle environmental challenges will be crucial to its role in Asia and the international system, said two world's political leaders from the United States and Australia at an Asia Society event on Thursday. Former Australian Prime Minister Kevin Rudd and former US Treasury Secretary Henry Paulson shared their views on changes China has experienced in recent years - including economic transformation and efforts in dealing with the environmental - as well as a series of reforms the country's new leadership led by President Xi Jinping has carried out.

Despite China's existing growth model being successful in terms of economic growth and job creation, China needs a "new" financial system to cope with emerging challenges, said Paulson.

"A financial system that's going to allocate capital away from the state-owned sector toward private sector and individuals, and create investment opportunities for individuals so that it can become a country of investors not just savers," said Paulson.

Key issues to look at as China continues its reforms by the new leadership include opening up the key markets in energy and telecom to private sector and to what extent the government can put the state-owned enterprises on the level-playing field, noted Paulson.

Paulson, who now leads the Chicago-based Paulson Institute, said that it's important for China to pursue constructive engagement with foreign firms that invest in the world's No 2 economy. "The thing I am looking at most closely is to what extent they are going to let the international companies - US companies, European companies and Australian companies - come in and compete," Paulson said. "You can bet there is going to be a battle about opening up to global competition."

On China's economic growth rate - one of the most-debated topics among economists - the former Treasury chief said he believes China's slower growth would be "better" because the quality of growth also matters.

As China is trying to shift its growth model from low-wage, investment-driven growth to consumption driven by domestic demand, challenges posed by the environment - including air pollution - also would be a factor for the world's No 2 economy to take into consideration to keep the balanced growth.

Rudd said that he has seen China's increasing efforts in tackling climate change issues.

The impact of the growth on the environment is, Rudd noted, "possibly the single, greatest radical change" in Chinese political economy in the last three years.

yuweizhang@chinadailyusa.com

(China Daily USA 09/12/2014 page1)