ORILLIA, Ont. — The two biggest banks in the world are Chinese.

Former prime minister Paul Martin pointed out that fact this past weekend at an annual public policy conference focusing on the economy, part of which discussed China's rapid emergence as a global economic power.

China's stunning growth -- along with emerging nations India and Brazil -- has come too fast and too big to ignore.

"What's going to happen in five years from now, if the Chinese and the Indian and the Brazilian economies grow and penetrate our economies -- as we have penetrated theirs?" Martin asked an audience at Lake Couchiching in Orillia, Ont.

Martin said the situation of Chinese banks is well known: they've helped to create the same property bubble that burst in the West. And along with banks in emerging nations, they're under-capitalized.

"What's going to happen if there's a major bank failure in China, India or Brazil? I tell you, there will not be a stimulus package big enough to restart our economy."

In a wide-ranging discussion on the economy and the G20, Martin and his co-panelists tackled the rise of China -- described by Professor Wenran Jiang as an "800-pound gorilla" of which the rest of the world is struggling to make sense.

"Everybody wants to understand China and whether the rise of China constitutes some kind of system challenge," said Jiang, a University of Alberta political science professor who has written extensively on China and its impact on the world.

Main issues that need to be discussed, he said, are China's impact as a re-emerging power, the country's position in the G20, and how other world powers should approach its rapid ascendance.

The rise

Jiang told the conference that no other country in the past three decades has risen economically as quickly and effectively as China:

• In 1981, 84 per cent of China's population lived in poverty, by World Bank standards.
• In 2005, the poverty rate was down to 15 per cent.
• During that period, China's economy grew 10 per cent a year.

China is the largest creditor of the United States, owning much of the U.S. debt, and will surpass it as the largest GDP in the world in 15 to 20 years, according to estimates from some economists.

"We're talking about astonishing achievements," said Jiang, "but at the same time there are very serious problems."

He describes what's happened in China over the past 30 years as the "modernization paradigm on steroids."

China recognizes the engine that powers its economy -- tons of cheap labour requiring massive amounts of energy, which feeds consumption demands in the West while producing environmentally-damaging waste -- cannot run indefinitely.

And while it wants to be seen as a great world power, China is aware of its weakness of being a primarily export-based economy and that its success is interdependent with other nations, Jiang said.

Unfair assumptions?

Jiang argued the way China tends to be portrayed in the West, as a resource-hungry, predatory power, must be debated; and simplistic state-to-state comparisons are no longer useful.

He pointed out that China has worked within the current framework of the international economic system -- in cooperation with other world powers -- to become the world's second largest economy.

He said you cannot compare China's ascendance to the rise of the Soviet Union and the threat it posed to the United States in the 1970s, as China's rise is more systemic. The iPad was assembled in China, but the innovators are American; so the Chinese are aware their economy is so interdependent with that of the U.S. and other nations. It must work in tandem with others.

How to engage China

Jiang said China is always scoping out which nations can be considered friends and which pose a threat.

He suggested attempts to interfere in China's domestic affairs will likely fail. Nations including Canada need to recognize that the Chinese -- by working through their own struggles internally -- will make the necessary changes from within to become a better player on the world stage.

As far as Canada is concerned, Jiang said Canada-Chinese relations are finally starting to come around again. He claimed that the relationship was damaged over the past five years under the Harper government, which abandoned the "strategic partnership" established in the fall of 2005 by Paul Martin's Liberals.

The words "'strategic partnership' may not sound like much to Canadian audiences, said Jiang. "But in the vocabulary of Chinese diplomacy, it means quite a lot."

The Chinese view of strategic partnership with another country translates to a long-term, stable relationship uninterrupted by domestic partisan politics of changes.

Jiang noted by early 2006, that partnership was damaged when the Conservatives, in a "partisan" move, dropped those words and effectively "dropped China from the foreign-policy priority list."

"They didn't use the phrase even during Prime Minister Harper's last visit to China in December," Jiang told CTV.ca on Sunday in Orillia."

"But what we see are substantial changes starting in early 2009 -- when the Conservative government put China back onto the priority list."

And this past June, when Hu visited Canada, the partnership was re-established.

"I was at the gala dinner when President Hu Jintao was hosted by Harper, and they talked about a strengthened strategic partnership," said Jiang. "That's the learning curve -- and it took the Conservatives five years but they turned (the relationship) around on a bilateral basis."

Jiang warned, however, that beyond those words, Canada still lacks a fundamental China strategy. "We still need more of a comprehensive vision of how to engage China on global issues."