Great expectations for summit
Leaders look for solutions in backdrop of anaemic global growth, Andrew Moody reports.
The G20 Summit needs to create a sense of hope that there are solutions to sluggish growth in which the global economy is now mired, a leading Chinese academic says. The meeting of the leaders of the world’s leading nations in Hangzhou in eastern China takes place against a difficult economic backdrop with stimulus measures proving increasingly ineffective.
There are also heightened concerns about an unstable Europe following Britain’s vote to quit the European Union and impending interest rate rises in the United States.
Shi Yinhong, professor of international relations and director of the Center on American Studies at Renmin University of China, said it is important for the summit to send the message that anaemic growth is not a permanent feature of the global economy.
“I think this has to be a key objective, to create a feeling of hope that the world can move on in a positive direction,” he said.
The big change since the last summit in Antalya, Turkey, last November is a growing frustration with the ineffectiveness of economic policies pursued since the global financial crisis in 2008.
Some expect world leaders to move away from debt-reducing austerity policies toward more fiscal expansion.
In the wake of the EU vote, the British government, for one, has abandoned its target to move into a budget surplus by 2020 and is looking to invest in infrastructure and other projects.
Zhu Ning, deputy dean of the Shanghai Advanced Institute of Finance, believes fiscal policy will be high on the agenda.
“I think the challenge will be how to develop a framework through which countries could work together to provide a fiscal stimulus to deliver higher growth,” he said.
Rana Mitter, director of the Dickson Poon University of Oxford China Centre, believes this is easier said than done.
“National credit cards are maxed out and I am not sure of the amount of appetite there is for increased taxes.”
“There are two major sets of barriers to fiscal expansion. There are the political ones such as the imposition of the euro single currency on Europe in the first place and the recent Brexit vote in the UK. And then there are the big longterm structural changes that various economic actors are caught up in. These leave little room for governments.” Martin Jacques, author of When China Rules
the World and visiting professor at the Institute of Modern International Relations at Tsinghua University in Beijing, believes the summit could be a turning point.
He argues that Western neoliberalism, which has dominated the agenda since the 1980s, is in terminal decline and rejected by voters as evidenced by support for both Bernie Sanders and Donald Trump in the US presidential election.
“There is a crisis in global governance. I think many countries, particularly in the developing world, are now looking for China to take a lead. If you look at what is driving growth in central Asia, it is China’s Belt and Road Initiative. Similarly, in Africa, it is China investment in infrastructure.”
“With new institutions like the Asia Infrastructure Investment Bank, China now sees itself as a mover and shaker of globalization, and if you went back only three or four years, you would say that no way that would be the case.”
Kerry Brown, professor of Chinese studies and director of the Lau China Institute at King’s College, London, says the problems the world now faces are too complex to be resolved at any one meeting.
“It does give a chance to hammer out some kind of international consensus about what to do. The core question will be how to balance meeting people’s expectations toward their living standards, while delivering this sustainably, and sorting out the real worries over stagnant income growth.”
A major agenda item at the summit will be how to respond to protectionist moves by individual countries. Trump, the Republican candidate in the US presidential election, has called for tariffs as high as 45 percent on Chinese goods.
David Shinn, a former US diplomat and adjunct professor of international affairs at George Washington University, believes the summit will strongly endorse a free trade agenda.
“Trade protectionism has been a growing trend in a number of Western countries. We certainly see it in the American presidential campaign based on the argument globalisation results in the loss of American jobs.”
“Most Americans understand that protectionism and resulting trade wars do more harm than good.”
Mitter at Oxford said it will be a huge challenge for national leaders and policy makers to pull off a summit that is a game changer.
“People always talk about resetting the agenda, but does anyone really know what any new agenda would be?”
Zhu, also professor of finance at Tsinghua University, said all the traditional existing monetary and fiscal tools have already been deployed.
“The marginal impact of such policies is increasingly decreasing, which means it is difficult to work out what the solution is,” he said.
Shi at Renmin University believes there are other routes to follow. “There needs to be emphasis placed also on the importance of innovation in driving growth, and this is where China is taking a lead with its own fast development of green technology and e-commerce. This is where China can show a way to others.”