September’s G20 summit is a chance for China and the forum to prove their relevance
promoting representation of emerging markets to tying UN development goals to
the economy, Alex He lists ways China could make the summit count.
Through its participation in G20 summits and by playing a significant role in global efforts to fight the global financial crisis in 2008, China has recently entered into the centre stage of global economic governance, and contributed to the global macroeconomic policy coordination and global growth in the G20.
The G20 at the leaders’ level — where China is currently president — has proven to be a perfect platform for the country to demonstrate that it is a responsible great power, and to communicate and maintain relations with other major powers.
Since the 2014 Brisbane summit, China has shown more interest in leading the agenda in the G20 and more actively advocated its own ideas on major issue areas such as macroeconomic coordination, international trade and investment, innovation in the pattern of development, and improving current international economic and financial governance. It also has become more confident in the G20 and in the field of global economic governance, and will more actively participate and seek greater say in an institutionalized way in the global economic governance system.
Considering the forum’s discouraging record since the 2010 Toronto Summit, strong leadership has been necessary to mitigate the risk of the G20 devolving into irrelevance. The hopeless stalemate in American politics and Europe’s tendency toward looking inward (brought to new heights by the euro zone crisis) do not bode well for the future efficacy of the G20. Given the huge size of China’s economy and its large contribution to global economic growth, China is now determined to play a leading role in global economic governance, increasing its prestige in the system, and continuously contribute to global economic coordination and growth when it hosts the Hangzhou summit next month.
A critical time for global economic governance
With the summit drawing nearer, sluggish, uneven global economic growth and greater risks and volatilities in international financial and commodities markets demonstrate that the world economy still falls under the deep influence of the global financial crisis, and is still experiencing profound readjustment. To make it worse, the outcome of the referendum on the UK’s membership of the EU added further uncertainties to the world economy.
Under the circumstances, China’s leadership at the G20, i.e., what China’s 2016 G20 agenda looks like, and how China can realize the goal of strong, sustainable and balanced growth, remains the biggest concern. The China summit is expected to achieve something on coordinating joint efforts on global macroeconomic policy making, the key area for the G20’s role in governing the world economy, and avoid the premier forum for global economic governance becoming irrelevant.
China’s leadership at the G20 will firstly depend on whether China can make progress on coordinating the joint efforts for global growth. The key area China shows its leadership at the G20 lies in macroeconomic policy coordination among member countries. The G20 Financial Ministers and Central Bank Governors’ meeting in July showed consensus achieved on using all policy tools – monetary, fiscal and structural – individually and collectively to achieve its goal of strong, sustainable, balanced and inclusive growth, which sent signal to the world that the G20 will try hard to stabilize global growth. Coordination on exchange rate policy among G20 members was also strengthened at the meeting and the ministers and governors promised to refrain from competitive devaluations and will not target exchange rates for competitive purposes.
Structural reform remains the top priority of China’s G20 agenda with regards to macroeconomic policy coordination. It is expected to provide a long-term driving force to bolster the strong, sustainable balanced growth. A landmark accomplishment on this regard was achieved before this year’s summit. Nine priority areas of structural reforms and 48 guiding principles have been developed and agreed upon, which will provide high-level and useful guidance to members. A set of indicators has also been agreed upon, which will be further enhanced over time to help monitor and assess the efforts and progress with structural reforms and challenges. With all these achievements, China is making progress in promoting the G20 macroeconomic policy coordination, which is always a tough job at the G20.
Four ways China can lead
China has also formed and improved other core ideas on global economic governance in advance of the September summit. Under the framework of the theme of the Hangzhou event, China has set four key issues that it believes it can play a leading role in promoting.
First, promote international trade and investment with an emphasis on fostering an open world economy and reinvigorating global growth, another main topic China has proposed since the 2013 G20 summit. China is evolving into a leader in advancing the new level of globalization that centered on promoting liberalization of trade and investment via the G20 platform. The first G20 Trade Ministerial Meeting held in July represented a major achievement of China’s G20 presidency in promoting the liberalization of trade and investment issues. China successfully coordinated the positions of the G20 major economies to oppose trade protectionism and promote global trade recovery and development. From the perspective of G20 mechanism building, it will also greatly enhance trade and investment issues in agenda of the forum.
Second, improve inclusive and interconnected growth, and implement the United Nations 2030 Agenda for Sustainable Development to strengthen the momentum of world economic growth. China’s position as the largest developing country has meant that it has had a natural interest in addressing development issues through the G20. China has listed the goal of implementing the UN 2030 Agenda as a main theme of the Hangzhou Summit. This issue in particular is consistent with the direction of China’s development, and exhibits the characteristics of the China G20 presidency.
Third, improve global economic and financial governance, which includes increasing the representation and voice of emerging markets and developing countries to strengthen microeconomic coordination, which China has advocated over the last three G20 summits. China will continue to promote the representation and say of emerging economies and developing countries at the IMF, especially given that the 2010 reform package giving emerging economies and developing countries more say in IMF proceedings was approved at the end of 2015.
Fourth, promote innovation-driven development and forge new sources of the world economy, including innovation in science and technology and promotion of the new industrial revolution and digital economy, as well as innovation in development concepts, institutions and mechanisms, business models, and structural reform.
Finally, in recent years China also began to embrace the idea of providing international public goods as a significant way to contribute to the global economic governance system. As the largest developing country and the second-largest economy in the world, China gradually realized it is supposed to do its part and contribute to international economic cooperation. By doing this, China would be treated as a responsible power and gain the status of a leading country in global economic governance. The global public goods provision prominently reflects China’s transition from a state-centric perspective to a global vision in global economic governance. It creates an opportunity for win-win cooperation for China and other countries in the global economic governance system. With China’s hosting of this year’s G20 Summit acting as a game changer, it is beginning to forge itself as an emerging leader in global economic governance with a global vision.
It is not an easy job to play a leading role in the G20. China needs cooperation and support from other key G20 members, such as the U.S., Canada, European countries and BRICS countries, to keep the forum relevant in global economic governance. Canada, “a middle power” and one of the founding countries of the G20 framework, can find common interests with China on maintaining the G20 as the premier forum for global economic governance and playing its positive role in international economic coordination.
Alex He’s new book, The Dragon’s Footprints: China in the Global Economic Governance System under the G20 Framework, will be released Aug. 25.