G20 summit to focus on long-term impetus
The G20 summit to be held in Hangzhou in early September is unlike any previous one: it will be hosted by the largest developing country in the world. But a key question remains: can China succeed in shaking the world’s 20 biggest economies out of their torpor?
China has high hopes for chairing a successful G20 summit, the country’s biggest diplomatic event of the year. With the two-day meeting less than a week away, plenty is already on the table, including a Beijing-led push to upgrade the G20 from a crisis response mechanism to a long-term governance platform.
A highlight of the upcoming summit will be developing a G20 blueprint for innovative growth, including a plan for building a new industrial revolution and the digital economy.
“It is the first G20 summit with a focus on the long-term impetus of global growth,” said Foreign Minister Wang Yi at a briefing in late May.
“Fiscal and monetary policies can only serve as countercyclical tools that help smooth out volatility in the short term,” said professor Zhu Jiejin of Fudan University. “It’s just like medicine. It may cure an illness, but does not strengthen the health of an economy.”
Zhu said the consensus on innovation had been a hard-won achievement under the Chinese presidency, especially given the severe market volatility in the first quarter of 2016.
“It is not easy for China to stay focused on a long-term agenda when some are calling for short-term stimulus packages,” Zhu said.
Swiss Finance Minister Ueli Maurer underlined China’s emphasis on fostering innovation and other structural reforms, which, he said, were important to raise productivity and ensure the quality and sustainability of growth.
“In this respect, the G20 Blueprint on Innovative Growth represents an ambitious agenda toward a new paradigm for growth based on knowledge and on new and cleaner technologies,” he said.
“Many countries have, since the global financial crisis of 2008/09, relied too heavily on monetary and fiscal easing,”
Trade ministers’ meeting
Another eye-catching item on the agenda is implementing the UN 2030 Agenda for Sustainable Development, the first time development is being given priority in a global macro-policy framework.
Huang Wei, a researcher with the Chinese Academy of Social Sciences, said: “Developed countries cannot thrive alone in this increasingly interconnected world. Developed and developing countries need to pool their resources to reverse sagging global growth.”
“Only with a holistic approach can we solve fundamental problems in the global economy,” she said. “The G20 used to deal with only specific problems.”
Moreover, amid sluggish trade and weak investment, the G20 under China’s presidency this year opened up a new and more substantive avenue for stimulating growth: a trade ministers’ meeting to promote international trade and investment.
“We cracked some real issues because China took the initiative of setting up the trade and investment working group and put in lots of work, which has been very productive,” said Rita Teaotia, commerce secretary of the Indian Department of Commerce.
“From the Hangzhou summit onward, there will be two wheels driving the G20, with the traditional finance ministers and central bank governors meeting, and the new mechanism of trade ministers’ meeting,” said Chen Fengying, a researcher with the China Institute of Contemporary International Relations.
Shaping the agenda
This could be one of the biggest breakthroughs at this year’s summit. Many of the long-term structural problems in the global economy have to do with trade and investment, she said.
G20 summit will be the first time that China hosts a global economic governance summit.
“It is a good opportunity for China to exercise its power in global economics,” Chen said.
She explained that because the G20 is an international forum with no secretariat or enforcing agencies, the outcome of the summit is to a large extent determined by the will of the host country.
Zhu stressed that China, as the biggest developing country, has the responsibility to promote more balanced governance of the global economy.
“The birth of the G20 has broken the myth of the G7 and allows for the exploration into diverse paths of growth.”
According to statistics from the International Monetary Fund, emerging and developing economies are home to 85 percent of the world’s population, accounting for almost 60 percent of global GDP and contributing to more than 80 percent of global growth since the 2008 financial crisis. China alone has contributed 35 percent to global growth in the past five years.
“There is probably some means for building new institutions given the rise of Asia and rise of China,” said Tim Harcourt of the University of New South Wales in Australia. “I think in some ways the G20 can play that role.”