By Zhao Minghao Source: Global Times Published: 2016-7-26
The 2016 G20 summit which will convene on September 4, in Hangzhou, capital of East China`s Zhejiang Province, is arguably an event of great magnitude for China to present its leadership role in global affairs. A communiqué, issued after the recently concluded meeting of G20 finance ministers and central bankers in China`s southwestern city of Chengdu, offers a glimpse of what that role will look like: "In light of recent developments, we reiterate our determination to use all policy tools - monetary, fiscal and structural - individually and collectively to achieve our goal of strong, sustainable, balanced and inclusive growth."
Worth noting in the communiqué is the group`s commitment to taking effective steps to address structural challenges, which signals another pivotal moment for the G20.
The world economy has yet to completely escape the long shadow cast by the 2008 financial crisis. In recent years, global trade growth has been weaker than global economic expansion. In 2015, the world economy saw a 3.1 percent rise in growth, outperforming global trade growth which only stood at 2.8 percent. More worrying is that the specter of trade protectionism seems to be on the rise. Since 2008, G20 economies have introduced 1,583 new trade-restrictive measures while only removing 387 pre-existing measures. Also, trade growth in developing countries was outshone by their developed counterparts for the first time in 2015, signifying the greater negative effect of flagging trade on developing nations.
Adding to these jitters, global markets appear to have been shrouded by various uncertainties since the start of 2016, with main commodity prices and major currencies mired in choppy fluctuations. On top of that, geopolitical conflicts have had a greater impact on the global economy. Recurring terrorist attacks and the refugee crisis have proved to be a drag on certain economies that are in the midst of recovering, and has even been seen to lead to political instability in Turkey. Britain`s vote to leave the European Union has also heightened uncertainty in the world economy. Now people are raising concerns that France might follow suit in departing the EU. According to a recent survey by the Pew Research Center, 61 percent of polled French citizens viewed the EU unfavorably while 66 percent of the respondents stated they felt disappointed about the way the EU responded to economic issues.
Unquestionably, globalization is being challenged in all parts of the world as an increasing number of people who believe that they are ending up as losers in the process. The root cause of the public anger is de facto lackluster economic growth. With that in mind, Beijing hopes to stress at the forthcoming Hangzhou summit that a reliance on monetary policy and fiscal policy alone won`t genuinely boost growth, and that major economies should take structural reforms extremely serious. The Chinese government holds the view that developed economies need to continue efforts in enhancing labor market flexibility, spurring investment and increasing productivity while their emerging counterparts will need to improve economic resilience, loosen regulation and promote competition, as well as push for reforms of financial institutions.
Echoing the trend for an emphasis on restructuring, the Chengdu meeting achieved a milestone, agreeing on nine priority areas of structural reforms and a set of guiding principles. The G20 economies "have also agreed upon a set of indicators which will be further enhanced over time to help monitor and assess our efforts and progress with structural reforms and challenges," read the communiqué. This means that a framework has been put in place for the G20 to press ahead with these reforms, which will serve to enhance coordination and improve overall effectiveness in the various efforts of the G20 economies, and accordingly maximize the positive spillover effects from the structural reforms.
China has also been pushing strongly for a G20 agenda on global infrastructure construction. Increasing infrastructure investment is still considered an effective approach to fostering economic growth and ensuring employment. The Global Infrastructure Initiative got off the ground at the G20 Summit in Brisbane in 2014. The World Bank also created a new paradigm for closing the infrastructure gap across the globe by hosting the first Global Infrastructure Forum earlier this year.
China hopes to leverage the forthcoming Hangzhou summit to boost the interconnectedness of global infrastructure, supposedly including construction of a cross-border infrastructure network.
In this regard, China spares no effort in urging multilateral development banks toward joint actions to support infrastructure investment. The China-initiated Asian Infrastructure Investment Bank started operations in January and signed a $1.2 billion co-financing agreement with the World Bank in April.
At the Chengdu meeting, major global multilateral lenders, including the World Bank, responded to the G20`s promotion of infrastructure investment by making their own commitments in the Joint Declaration of Aspirations on Actions to Support Infrastructure Investment.
It is anticipated that the G20 summit in Hangzhou will bear even more fruit that ideally includes detailed action plans to achieve innovation-led economic growth. With its economy expanding by 6.7 percent in the first half of the year, China continues to be a significant growth engine for the world economy. The Chinese economy has also been striving to move ahead with structural reforms.
That being said, Beijing is ready to share its experience and call for consensus at the Hangzhou summit to propel the global economy to continue along the right trajectory.
The author is a visiting fellow at the Chongyang Institute for Financial Studies at Renmin University of China.