The G20 is considered by many to be the “the premium forum” for international economic cooperation. It is important to Canada, because the G20 table determines priorities and directions for international rule-making. The G20 presidency rotates each year, along with the responsibility to organize the work programme and preparations for the Leaders’ Summit meeting. China succeeds Turkey on December 1 — an important role for the Asian powerhouse. But what can we expect from a G20 under Chinese leadership?
Last month, former Canadian Prime Minister Paul Martin accompanied a group of CIGI experts to Beijing and Shanghai to discuss ideas for China’s G20 presidency. We had meetings with senior Chinese leaders, and organized events and conferences with several think tanks.
Our message was that the future primary role of the G20, in addition to its core financial agenda, should be to strengthen international institutions to deal with issues like refugees, cybersecurity and climate change. We reminded our audience that the G20 was created to manage globalization – if not the G20, than who is capable of dealing with truly global issues today? We emphasized that the world’s eyes would be on China, looking for follow up on recent handshake agreements between President Xi and President Obama on climate change and cyber security.
Chinese reaction to our call for their leadership was ambivalent. They suggested expectations should be minimized. The dominant factor limiting ambition appears to be Chinese assessment of the Sino-U.S. relationship. Chinese officials conclude that the Americans do not have a benevolent view of China’s ascendance. An example is the negative reaction out of the U.S. to the Asian Infrastructure Investment Bank and the effort discouraging other countries from joining. Shown a picture of a panda sitting on a bald eagle’s wing, the reaction by most Chinese was embarrassment and advice not to display the picture.
Noting Deng Xiaoping’s widely quoted aphorism to never seek leadership, during last month’s meetings, we reminded our hosts that he also state “We should do more and engage in less empty talk,” and that Ambassador Wu Jianmin noted that “keeping a low profile does not mean doing nothing.” We highlighted that State Councillor Yang Jiechi, the person in charge of G20 preparations, has said “We should give greater play to the leading role of leadership diplomacy, vigorously grow relations with other major countries, step up friendship and win-win cooperation with our neighboring countries and other developing countries and move the international order in a more just and equitable direction.”
To pursue that very approach, China should engage with the U.S. in the G20 preparatory process, and then Germany, the likely 2017 President.
China should pursue “Plan Bs” for IMF reform, including expanding the Chiang Mai Initiative of bilateral currency swap and repurchase arrangements — providing emergency infusions of foreign currency to member countries suffering from liquidity crises. There is a need to strengthen global liquidity regulations and harmonize conditionality approaches to deal with liberalized capital controls in an unstable system where the architecture exacerbates bubbles and transmits instability. China should consider giving a strengthened Financial Stability Board a leading role in sovereign debt restructuring. Eventually there will be a need to price carbon, equalizing it at the border. The G20 host has impact and leverage in terms of controlling and directing future research and policy analysis by commissioning future reports. China could call for reports on complex issues to future Leaders’ meetings, inviting work by international organizations, and G20 Ministers or officials.
The Chinese will emphasize continuity in terms of the Turkish G20 priorities — Inclusive Growth, Implementation and Investment. Priorities may include continued effort for international monetary system reform (IMF quota, the SDR basket), dealing with spillover from Central Bank actions, and a new system for balance of payments support, improving the web of bilateral swap arrangements. “Green Finance,” the creation of a green financial market, may be featured to meet environmental challenges.
The Chinese Vice-Minister of Finance, prominent at two of our events, made perfectly clear that there are two tracks preparing for the 2016 Summit. The finance track will focus narrowly on the Turkish priorities – Inclusive Growth, Implementation and Investment. He was clear in his emphasis of a narrow focus, searching for new sources of economic growth. He was on a different wavelength from China’s Foreign Affairs sous-Sherpa, who was much more expansive in his listing of issues, and his emphasis on future consultation and engagement. In contrast the Vice Minister of Finance was dismissive regarding the possibility that G20 policies on climate change, internet security and migration could all be congruent with his emphasis on new sources of economic growth.
In reflecting on the potential for the bilateral Canada-China relationship, acknowledging the many suitors pressing for China’s attention, the Canadian government can build on recent bilateral agreements with China on dialogue mechanisms, the currency swap agreement and renminbi clearing arrangement. Canada could pursue further cooperation on market access for our exports, nuclear energy and air transport, and champion the expansion of the Trans-Pacific Partnership to include China.
The G20 does not have a permanent secretariat, providing research capacity. Think20, an informal G20 engagement group of think tanks recognized by the Chinese Government, can deal with complex issues which national policy shops are unwilling or unable to analyze dispassionately. China tasked its Institute for World Economics and Politics to lead the Think20 in 2016. They will be looking for win-win issues and positive sum initiatives, navigating the apparently over-constrained global context. Canadian policymakers and researchers have an open-door for innovative and ingenious ideas.