In the wake of the global financial crisis, 2008 is a year for serious reflection on the meaning of globalization and the importance of economic policy coordination. The overall attitude amongst the leading industrial powers at this November's G20 summit is to maintain domestic stability under a framework for reform of the global financial system. It is no longer enough for a few nations to make the final call. As Chinese President Hu Jintao argues, the way forward is to include more nations in global policy making, ensure domestic and regional stability first, and then let the ripple effects to take place. Key issues agreed by world leaders at the summit to enhance coordination included:

*reform of international financial institutions such as the World Bank and the International Monetary Fund;
*a global agreement by the end of 2008 leading to a free trade deal;
*improvements to financial market transparency, including complete and accurate disclosure by firms of their financial conditions;
*ensuring that banks and financial institutions' incentives "prevent excessive risk taking";
asking finance ministers to draw-up a list of financial institutions whose collapse would endanger the global economic system.

Already, rescue plans have been drawn up and implemented one after the other to ease domestic economic pressures. In the U.S., following bailouts of the American International Group, Bear Stearns, Fannie Mae, Freddie Mac, Citigroup and a historic rescue plan of $700 billion, another stimulus package from the Fed for $800 billion is underway. Of the $800 billion, the Fed is to buy up to $100 billion in debt from the troubled mortgage giants Fannie Mae and Freddie Mac. The Fed said that it would also buy another $500 billion in mortgage-backed securities‚ pools of mortgages that are bundled together and sold to investors. Will the big three auto manufacturers be the next in line to receive financial assistance? The answer is a likely "yes" owing to the sheer size of these businesses.

On the other side of the globe, the emerging markets in China are also suffering. President Hu Jintao warned that the economic situation is a test of the Communist Party's ability to govern. From snowstorms that shattered south China in the beginning of the year, unrest in Tibet, a historic earthquake, the Olympics, product quality scares, to the recent financial crisis, the Chinese government has been consistently managing crises leading to its own historic stimulus package of $586 billion to get through the next year or two. To maintain overall stability, China needs to ensure at least an eight percent growth rate through more forceful and effective policy measures, including the biggest cut in interest rates in more than a decade from 6.66 percent to 5.58 percent, to stabilize property markets and encourage domestic consumption. As Zhang Ping, head of the National Development and Reform commission admitted, excessive bankruptcies and production cuts will lead to massive unemployment and stir social unrest. In spite all of the hype, as things stand, it is too early for a reversal of roles between the U.S. and China. Rather, we should expect more communication and coordination amongst nations as they become more realistic about their own capacities.

With an estimated $2 trillion worth of foreign currency reserves and China's growing global status, one wonders whether or not this developing, Communist-led state will one day become a major saviour of the Western banking system. While the Chinese Communist Party is aware of China's potential to take more of the limelight on the global stage, it is also realistic about domestic concerns at home, including reconstruction owing to natural disasters, monitoring quality controls of China's products and preventing its own economic slowdown. Despite the fact that China has been buying up U.S. government debt, which has allowed the U.S. to spend beyond its means, the central government will continue to be cautious and only do its part to help stabilize world financial markets. One should look for developments of China's role in the world economy in the series of global financial summits, with the first one to be held in the U.S. on November 15th.