It is time to build a new international financial system to better allocate resources globally and promote world economic growth, according to an economist with China's central bank.

A fairer financial system, which the Zhuhai Declaration strongly advocates, will not only help developing countries obtain more funds and technologies to facilitate industrial upgrades and economic growth, but will create investment opportunities for developed countries, said Jing Xuecheng, deputy director of the People's Bank of China's Research bureau.

"The existing international financial system continues to expose its weaknesses and is increasingly out of step with the development of the global economy," he said.

A string of bank closures, corporate scandals and currency crises in the 1990s demonstrated the fragility of the international financial system in the face of major dilemmas.

The lack of a stable global exchange rate system, weak financial supervision on international capital flows, especially short-term capital, as well as the lack of an early-warning system and emergency assistance arrangements, are the major factors hindering crisis management efforts, Jing said.

Worse, he said, developing countries are being marginalized in the process of financial globalization, with developed countries virtually making up the rules for the financial system and controlling major international financial centres.

It has led to many developing countries copying developed nations' designs for their own financial systems.

That situation, coupled with the fragility of the international financial system, tends to result in sharp fluctuations in international financial markets. They not only jeopardize trade relations between countries, but impose exchange rate risks on developing countries, Jing said.

To address the problems, developing countries need to establish domestic financial systems that fit their respective national conditions so they can, to the greatest extent possible, mobilize domestic savings and convert them into investments, he said.

Relatively poor investment environments and low capital returns are obstacles hindering developing countries' entry into international financial markets to raise more funds. International financial institutions need to provide necessary technological assistance to help developing countries build modern financial systems and help them tap international markets.

And government financial aid from developed countries to developing nations remains indispensable, Jing said. Those funds dipped to US$38.6 billion in 2000 from US$55.2 billion in 1999, according to the World Bank.

"This not only impeded the potential economic growth in developing countries, but does no good to exports and foreign direct investments by developed countries," he said.