China must "modernize its economy from top to bottom," says Nobel-Prize winning economist Edmund Phelps in this video interview with The Deal magazine. "They've got to transform the economy for innovation." To do this, says Phelps, China "for sure is going to need a brand new financial system that's not closely tied to local governments, and they're going to need a whole new industrial system in which ordinary people can start up businesses without having to go to the king for a charter." We caught up with Phelps, who is the director of Columbia University's Center on Capitalism and Society, at the New York Forum. For more of our conversation with Phelps on a topic closer to home, watch "Introducing the First National Bank of Innovation." And for more interviews from the international event, watch "Japan chills nuclear power around the globe," our video conversation with Oppenheimer Funds Inc. chief economist Jerry Webman, and "The hidden risk in a Greek default," our interview with Tufts University's Amar Bhidé. - Mary Kathleen Flynn