China will play a more important role in the world economy if the global financial crunch leads the three richest economies into recession next year, said a senior economist with the Chinese Academy of Social Sciences.

Li Xiangyang, vice director of the Institute of World Economics and Politics under CASS, said in Beijing on Thursday that the world economy may grow 2 percent next year, down from an average annual growth of about 5 percent in the past decade.

The conclusion came from a CASS yearly report on the global economic and political situations and Li headed the team which compiled the report.

"The world economic expansion next year will be driven by advances in emerging markets while the United States, the European Union and Japan- the three major economies- may all post negative growth," said Li.

"China aims to sustain its economic expansion at above 8 percent next year, and its massive demand for imports will become a key force in stabilizing the world economy."

Li said countries should be aware of the risk of further meltdown in the global financial system next year when economies could suffer because of the crisis and could transfer negative influences back to the financial sector.

He also cautioned that China should be careful with the investment of its huge foreign exchange reserves.

"We have to properly deal with the risks of fluctuation in exchange rates and inflation when investing the reserves. Also, when we buy assets other than national bonds, we have to look out for commercial and moral risks," Li noted.

"The world's communities are paying increasing attention to environmental protection. Clean energy may become a pillar industry for some countries and there exists a huge market demand," said Li.

(Shanghai Daily December 26, 2008)