China Business Journal: At present, the U.S. economy is entering a period of recession. Will the U.S. economic downturn reverse the development trend of the global economy?

Tao Dong: Diversification of the world economic model creates more opportunities for development rather than a downturn.

In the past decade, the United States was the only economic superpower in the world and was backed mostly by consumption. During that period, U.S. financial capitalism boomed, while Japan and the EU experienced structural economic problems. But a major change has taken place. A number of economies beyond the three major traditional economic powers have arisen, with competitive exports and strong domestic demands.

The first ones are the direct beneficiaries of globalization. China and India are two examples. The second ones are the resource exporting nations, such as Brazil, Russia and the Gulf countries. Those countries finished their primitive accumulation of capital by exporting, and their domestic consumption is now booming. Therefore, emerging markets, especially the BRIC (Brazil, Russia, India, and China) countries, provide the world economy with more distribution opportunities, and the global economic development momentum has been diversified. In other words, U.S. consumers are no longer the only contributors to world economic growth. Consumers from developing countries whose salaries have increased substantially also account for a large portion of the consumption that drives world economic development.

What are the other features and impacts of global economic development?

First, in the past 10 years, the world's economic development was relatively stable. Even though fluctuations existed, their impacts were limited, and the economy was easy to recover. It started with Alan

Greenspan, former U.S. Federal Reserve Chairman, who believed if the central bank could correctly send its intention to the market in advance, it would be easier to achieve its goals and cushion the blow to the market when the information was officially announced. Since then, the central bank's transparency has been greatly promoted.

Second, financial globalization has created an international flow of capital. Economic adjustments occur frequently in accordance with the inflow and outflow of capital. But in the past, economic adjustments only started after central bank meetings. This shows that financial markets mature when they call the shots, while central bank policies take a secondary position.

The third [feature] is the increasing [number] of investment tools in the financial markets. In the 1980s, investors mainly invested in stocks or bonds. But afterward, financial institutions flourished with more participants like hedge funds, private funds and sovereign wealth funds. The new participants brought in new investment strategies and led world financial markets to diversified development. Financial derivatives had also boomed, which stabilized financial markets to the largest extent possible, but when major accidents occurred, the whole world suffered, just like with the U.S. subprime mortgage crisis.

Therefore, driven by the diversification of growth momentum, global capital and the financial markets, the world economy has been developing soundly. The subprime mortgage crisis had caused enormous losses, but I strongly believe it will be a small setback in human financial history. In the long run, I believe the three trends I mentioned will continue.

You said earlier that the world is entering a "super capitalism" era. What does this mean for emerging markets and developed countries?

Times change and so do economic relations. Super capitalism was one of the major features of global economic development in the past two to three decades. One third of the world's economic activities are controlled by less than 3 percent of global financial capital. The world's top 500 companies, except resource-related companies, have nearly stopped production. The number of their researchers outpaces the number of workers, and the number of their research centers surmounts the number of factories. Those companies do not seek overall control of the production process, but choose a high-end and a link that cannot be copied, either technology or a monopoly or another link in market operations. This is called rent-seeking in economics and is a major distinction in the post-industrial era.