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G20 summit serves as platform for nations to coordinate post-crisis financial policies

By Liu Zongyi | 2016-08-01 | Hits:
(Chinese Social Sciences Today)

Volunteers from around the world apply to offer their services at the G20 Hangzhou Summit.
 

 

China assumed the rotating G20 presidency last December and is set to host the summit in the eastern city of Hangzhou on Sept. 4 and 5. The conference is taking place against a backdrop of weak global development, geopolitical conflicts and crises around the world, as well as an economic slowdown in China.
 

Considering the global climate, China watchers and international relations experts are paying close  attention to the outcome of the summit. By looking at the role China has played, one can gain a better understanding of the prospects for the success of the summit.


 
Purposes of participation
Above all, China will advocate for the reform of the international system through the platform of the G20. In addition to meetings of finance ministers and central bank heads that the G20 has hosted since it was founded in 1999, heads of state have periodically met at summits since 2008.
The meetings and summits are a response to the global financial and economic crisis. The G20 facilitates the coordination of policies among all nations and reflects a growing recognition of the role emerging economies play in global governance.


Declining growth rates over the past two years have not weakened the advantages emerging economies have over developed countries. The top issue for China and other G20 member countries is the lack of a unified world order. Through the G20, which serves as a platform for equal dialogue, China and other emerging economies expect to have a bigger say in the international system, participate in the establishment of international rules, and promote reform in international finance, investment and trade while securing opportunities for developing nations in global economic development.
 

China’s involvement in the G20 is aligned with its peaceful development strategy. It proposes incremental reforms to the existing international order rather than a “grand strategy” that would replace the Bretton Woods system and restructure global economic governance. Through the G20, China hopes to participate in the construction of the global order and become a responsible stakeholder.


The G20 provides a platform for dialogue among almost all major countries, particularly China and the United States. Interaction between the two nations under the G20 framework will influence the development of their relationship in a global context.
 

In addition, China will revitalize the development of the G20. Now, the G20 faces a risk of becoming obsolete because it was created to respond to crisis, and now that the crisis is under control, it is no longer valued by Western nations. Some analysts hold that China should take the lead in developing the G20. As an economic power, China is a decisive force in containing global economic risks, promoting world development and strengthening global governance.
 

As a developing country, it understands the needs of other low-income and developing countries, putting it in a position to better protect their interests. It has a huge accumulation of foreign exchange reserves, enjoys a good reputation in infrastructure construction and implements comprehensive reform to maintain sustainable development. Many nations expect to draw on the Chinese experience of rapid development and economic transition. It is recognized that the Chinese government is obligated to promote the reform and development of the G20.
 

Moreover, the G20 summit, which aims to promote reform in international finance, investment and trade, will nurture a favorable external environment for the reform and opening up in China. Coordination in macroeconomic policies and development strategies among member countries will bring great potential for world economic growth.
 

China will take advantage of the G20 presidency to promote national economic and social reform while strengthening coordination in development, trade and investment. As the host country for the summit in 2016, which also marks the beginning of the 13th Five-Year Plan (2016-2020), China will demonstrate its commitment to structural reform to win support from the international community.


 
Relations with other blocs
To realize the aforementioned goals and make the Hangzhou Summit a success, China should properly handle the relationship with other state blocs.

 

The Group of 77 is a coalition of developing nations. China should start with the foundation as a developing country to give full play to its role as the host state. It has prioritized the development issue in the agenda of the 2016 summit, placing it in a global framework of macroeconomic policy for the first time. The summit will make the first action plan in line with the 2030 sustainable development goals. The Hangzhou summit will be more representative of developing nations than ever. Also, it will announce a specific statement on climate change for the first time in its history. In addition, innovative measures that take into account interests of developing and developed countries will be formulated to promote cooperation among them.


The BRICS nations—Brazil, Russia, India, China and South Africa—share a common interest in global economic problems, such as the reform of monetary and financial systems. Though the BRICS summit will be held after the G20 summit this year, China has already negotiated with the BRICS nations. During the meeting of the foreign ministers of China, Russia and India in April, Russia and India supported China’s bid to host the 2016 G20 summit. The three nations agreed that developing countries need a bigger say in global economic and financial governance. They also expressed the commitment to the 2030 sustainable development goals and the Paris agreement on climate change.
 

The G7, a group of the seven most-advanced economies—Canada, France, Germany, Italy, Japan, the United Kingdom and the United States—played a leading role in agenda setting during past G20 summits. However, the latest summit of the G7 in Japan achieved consensus on very few economic issues. Instead, it focused on politics and security. China-Japan relations face many obstacles, but China’s relations with European countries remain steady. Though Brexit will greatly impact the European Union, China will not abandon its support for European integration and is exploring ways to coordinate its development strategies with the Europe.


China supports France in the establishment of the Paris agreement. It will cooperate with Germany to draw a blueprint of innovative growth and make an action plan during the G20 summit. China and the United Kingdom are collaborating to finance the “Belt and Road” initiative because Britain may be more dependent on emerging economies in the wake of Brexit.
 

Cooperation between the G2—the United States and China—is of vital importance to the success of the G20 summit. As a representative of developing countries, China should contribute more to safeguarding the interests of developing countries and shoulder more international responsibilities. However, it should be careful to avoid accusations that it presents a challenge to the existing international order controlled by developed countries. Chinese proposals, including the Asian Infrastructure Investment Bank, the Silk Road Fund and the “Belt and Road” initiative, are designed to address the problem of insufficient global demand. However, some American people have misinterpreted these initiatives as sabotage to the existing international financial system.


Geopolitically, the United States is continuing the strategy of “rebalancing in Asia-Pacific region.” It is stirring up tensions in the South China Sea, building new multilateral military alliances, and meddling in China’s relationship with Japan and South Korea while pushing forward the Trans-Pacific Partnership Agreement, hindering the economic integration in East Asia.
 

During the China-US Strategic and Economic Dialogue at the beginning of June, China decided to grant the United States a quota of 250 billion yuan under the country’s Renminbi Qualified Foreign Institutional Investor program and release a negative list for the Bilateral Investment Treaty, laying a solid foundation for the success of the G20 summit in Hangzhou. Though the United States supported China’s bid to host the G20 summit, the conflict over sovereignty in the South China Sea still exists and may escalate. Therefore, China should learn lessons from the G20 summit in Saint Petersburg, Russia in 2013 and steer clear of geopolitical conflicts at the summit.


    
Liu Zongyi is from the Shanghai Institutes for International Studies.