Senior researcher says globalisation has brought dangers as well as benefits Potential problems in the global economy, next year's US presidential elections and weak control over the domestic financial system top a list of factors affecting the mainland economy, according to a senior government researcher. In an essay published by the influential Outlook Magazine, the director of the State Development and Reform Commission's Macroeconomic Research Institute, Ding Yuanzhu, said the mainland economy had become increasingly vulnerable to outside influences. He said that its integration into the world economy had brought benefits such as easier flows of goods, capital and information. However, it also made the mainland economy susceptible to the ebbs and flows of international finance and stock markets, as well as surges in the price of oil. Mr Ding said calls by the US and Japan to increase the value of the yuan were a major challenge to the mainland's financial system, which needs a cheap currency to stimulate exports. He said China's relations with other nations, particularly the US - its largest export market - were another factor which would determine economic growth. He said recent US action such as the war on Iraq had placed enormous pressure on the central government as it had been forced to wade into international political debates that it would rather avoid. As a permanent member of the UN Security Council, China was courted by the US and its allies on Iraq. Mr Ding said the US presidential elections next year would be a critical juncture in Sino-US relations. If George W. Bush is re-elected, Mr Ding believed the US foreign policy of hegemony will be strengthened. However, if the Democratic Party candidate takes the White House, Mr Ding predicted significant changes. Another concern was the nation's inability to control and monitor capital flows and bad loans, which Mr Ding called a major setback. For example, he said while domestic banks accounted for 80 per cent of mainland lending and held around 75 per cent of personal savings, institutional borrowing created less than 30 per cent of industrial production value. He said at least 25 per cent of bank loans were in default. Mr Ding is also concerned by the growing number of non-government organisations, the worsening environment, inefficient state-owned enterprises, rural poverty, lack of a social welfare system, stagnation in education reform, and wealth discrepancies between the coastal and inland areas. He said the government currently faced a major challenge in trying to develop appropriate measures and policies to manage non-government organisations which have been steadily growing in number and influence. On environmental issues, Mr Ding said pollution and natural disasters such as sandstorms, flooding and droughts have eroded as much as 14 per cent of the gross national product and damaged one-third of the land mass.