Since the mainland's opening three decades ago, there has never been a shortage of debate in academia about the government's role in economic development. Now, in the midst of the whirlwind global financial meltdown, some believe a consensus has been reached that there needs to be a larger role for the state and tighter regulatory oversight as opposed to a more laissez-faire approach. The reason is simple. As mainland banking regulatory chief Liu Mingkang said as early as September, 'the teachers are not always right'. This catastrophic year demonstrated how a subprime credit crisis could balloon into a larger financial meltdown, leading to the collapse of the world's top financial institutions and to widespread governments bailouts. The year of disasters also broke the back of unfettered capitalism. 'Self-regulation is finished,' declared French President Nicolas Sarkozy. 'Laissez-faire is finished.' Even former US Federal Reserve chairman Alan Greenspan conceded in October that the global financial crisis had exposed a 'mistake' in the free market ideology that had guided his 18-year stewardship of US monetary policy. Mr Greenspan said he and others who believed lending institutions would protect their shareholders were in a 'state of shocked disbelief'. Not only the west but also the mainland is rethinking the capitalist system that has prevailed for the past century and a half. 'In the past, a lot of domestic experts argued that China should learn the western model of 'small government' and were dubious about the central government's austerity measures,' said Han Meng, a professor at the Institute of Economics at the Chinese Academy of Social Sciences. 'But now, in retrospect, it seems most people accept that it's necessary to have macroeconomic controls.' More than a decade ago, when it was liberalising its economy, the mainland saw the devastating results of overzealous capitalism - the Asian financial crisis. That calamity showed Beijing that market liberalisation and free capital flows into developing countries could be destructive. Now, 11 years later, comes another emergency. Although the closed nature of the mainland's financial system has limited its exposure to the crisis, it remains firmly integrated with the global economy through its dependence on exports and sizeable holdings of US government debt. 'The global financial crisis has certainly caused China's leadership to reassess the pace of financial-sector reforms,' said Jing Ulrich, managing director and chairman of China equities at JP Morgan. 'They will continue to pick and choose the systems that best fit the country's unique development goals. Lessons may be learned from the recent difficulties in the west about the preferred method of financial-sector organisation.' China's financial institutions have traditionally operated vertically, with separate retail banking, investment banking, fund management and insurance firms. Professor Han said the mainland would not scale back its 'opening up', especially in its financial sector, but regulation should be a higher priority, and Beijing should control the pace of liberalisation and not be influenced by other countries.