"I believe that now is as good a time as any for China to be taking further bold steps forward in the country's reform and liberalization," Yam said in Shanghai, in his first keynote speech since retiring as HKMA chief executive last month.

"The global financial crisis presents to China a golden opportunity further to embrace globalization and, importantly, to exert its rightful influence in the determination of the global agenda and in the modification of global standards."

However, major economies are under considerable stress as a result of the financial crisis and an increasing degree of interdependency among trading partners, Yam said.

There are, for example, strong political pressures both among countries for opening up markets and for protectionist measures, he added.

"The large current account deficit of the United States is often attributed to the inflexible exchange rates of emerging market currencies, in particular the renminbi, and the high savings rates of emerging markets, in particular China."

How these geopolitical forces work is "well beyond my comprehension," and they only add to the complexity and challenge that policymakers face in China, Yam said.

"We are likely to see rather frequent policy shifts, as the authorities steer through unchartered waters," he said.

"These shifts may well be quite sharp and unexpected to many, as we are in an unusually uncertain world."

Yam said the so-called Anglo-Saxon model of economic development, where capitalism and the free market are taken for granted as the preconditions of sustainable growth and development, have been seriously challenged recently by the global financial crisis.

Many are seeing recent events as proof that the market system is destined for crisis, for it is susceptible to being rigged, reflecting what they see as capitalism's intrinsic evil, he said.