At the same time, the government should give importance to the high-yield segment of the corporate bond market, he said. Another point Li made was that China should draw lessons from the United States and establish a complete financial services infrastructure, including a credit-register system, a bank-rating system, a credit-rating system and a payment system.

The next international currency?

The crisis has given rise to calls for a new Bretton Woods system of monetary management that sets rules for commercial and financial relations among major economies. Discussions are focusing on issues such as which currency should be selected as the key currency of the system and whether other currencies should be pegged to the key currency at fixed exchange rates or floating rates.

Li said he supports fixed exchange rates, because the exchange-rate system involves international relations, and a stable pricing system is very important for an economy. China, in particular, needs a stable international monetary system and related policies.

"There should not be so many factors of uncertainty occurring simultaneously," Li said, stressing that in the event of an international payment imbalance occurs, the U.S. dollar, the euro and the Japanese yen would all shoulder the responsibility of adjustment.

China is capable of maintaining stable and moderately high GDP growth and uplifting its status in the global economic arena. This is largely because the country's real economy has been less exposed to the crisis, despite the signs that a global economic slowdown has surfaced, Li said. China might make its voice heard louder by actively participating in this round of adjustments and reforms of the international monetary system, he said. The country should engage itself in promoting regional economic growth and financial cooperation within Asia and allow its currency to play an increasingly important role in the Asian economy and financial activities, he said.

China has to have a double deficit, or a current account deficit and a fiscal deficit, first in order to make the renminbi an international currency, Li said. But the country cannot handle a double deficit right now, he added. On the other hand, making the renminbi a regional currency would bring China real benefits, he said. But at present the country should focus on creating a transpacific free-trade zone among the 10 Association of Southeast Asian Nations (ASEAN) members.

Long-term returns

Li said China would have to buy U.S. Treasury bonds if the country continued to have huge foreign exchange reserves, because its reserves could only be used to buy overseas financial products. Furthermore, China can only choose between a few currencies, including the U.S. dollar, euro, Japanese yen and British pound.

China eyes long-term returns on its foreign exchange reserve investments and has spent a lot on U.S. treasury bonds, he said. Other bonds such as those issued by the mortgage finance, government-sponsored enterprises Freddie Mac and Fannie Mae have had higher yields than treasury bonds, but they also have involved more risk, Li said.

Li also criticized the suggestion that China could convert its U.S. dollar reserves into euro reserves as "speculation typical of individual stock investors." The foreign exchange market would respond quickly if news leaked, and losses would be inevitable, because it would take the government at least two months to convert $2 billion into euro, he said.

Moreover, Li cautioned the government about acquiring overseas financial institutions amid the financial crisis. "We have no idea when the crisis will come to an end, and much more important is the cultural barrier," he said. "We can buy Merrill Lynch, but we cannot do what its team is capable of."