China's G20 Moment Approaches
Tristram Sainsbury, G20 Studies Centre, Lowy Institute for International Policy
September 2, 2016
The Chinese G20 moment is approaching rapidly. The Hangzhou Summit on 4 and 5 September will be an big event.
It is an opportunity for China to show off to two dozen world leaders as well as to thousands of delegates and journalists from all over the globe. The Chinese government has gone to town, both literally and figuratively, to spruce up Hangzhou. No expense has been spared in hosting. With some pollutors around Hangzhou temporarily out of action, the skies in China will be a special shade of "G20 blue."
The summit comes during an eventful 2016 and at an interesting time in the global economy. The International Monetary Fund (IMF) recently downgraded its growth forecasts to 3.1 per cent in 2016 and 3.4 per cent in 2017. IMF chief economist Maurice Obstfeld has said that Brexit threw a spanner in the works of their world economic forecasts, and the IMF is warning of future downgrades.
In recent years, the global economy has been plagued by a scenario of low growth, high unemployment, a corporate sector that continues to face incentives to redistribute earnings rather than invest, rising risks, and persistent and unresolved inequalities.
This is not a new story. There have been sixteen downgrades in the IMF's global growth outlook since January 2012. During this time, the risks around growth have transitioned from a generic sense of heightened risk to more specific, near-term risks.
And the effectiveness of the policymaking toolkit — structural, fiscal, and monetary tools — is being increasingly questioned given that monetary policy is extraordianarily accommodative, debt levels are elevated, and there is growing popular discontent with the flows of globalization. These doubts add to growing questions around the G20's relevance.
So what should we expect leaders to deliver?
Straight off, it is worth tempering expectations. The G20 may be China's number one foreign policy priority in 2016, but it remains highly unlikely that we will see policy miracles — like those
of the trillion dollar London summit in 2009 — that will suddenly jolt global growth out of its current malaise. That kind of result is unrealistic for any G20 summit convened at a time when countries are increasingly turning inwards, and when there is not a pressing criss to focus minds.
Instead we should look to the G20 to deliver positive, incremental change. The G20 also remains a useful exercise in the longer-term process of fostering habits of cooperation among key economic policymakers, and China has demonstrated its constructive engagement on shared, global economic challenges.
China has pursued a technical, long-term agenda that aligns with its domestic agenda, and has placed particular emphasis on structural reform, trade, investment, and sustainable development.
Leaders are likely to welcome a variety of blueprints, action plans, guiding principles, indices, strategies and cooperation initiatives. Such actions have been part of recent statements by energy, agriculture, labour and employment, and trade ministers. The July trade ministers' meeting in Shanghai, for example, was a noticeable improvement on recent years' trade gatherings, with the joint declaration and global trade growth strategy better aligned with the G20's strengths of strategic leadership and political momentum to overcome roadblocks. China's commitment to stronger trade policy was on display.
Hangzhou will need to be seen as delivering on the platform established at trade, finance and other ministerial meetings, and contribute to 'ten major results' that Chinese Foreign Minister Wang Yi has foreshadowed would be delivered to leaders in Hangzhou.
But will leaders in Hangzhou make tangible progress on the G20's key challenge of increasing economic growth, while at the same time increasing its resilience? There has been a mixed messages coming on these funadamental G20 objectives.
The G20's resilience goals continue to be advanced — although economic crises are not over, growth is not strong, sustainable or balanced, and continues to frustrate. Moreover, the Brexit vote revealed how governments, particularly in advanced economies, have failed to address the challenges arising from globalisation.
G20 leaders will be under pressure to demonstrate what Larry Summers has referred to as "responsible nationalism" in their countries, demonstrate leadership on cross-border economic governance, describe the value of the liberal economic order, and defend the role of multilateral institutions such as the IMF and World Trade Organization.
Then they need to turn talk to action. If G20 ambitions are notmet, then this scenario of low growth, high unemployment and mounting risks will continue to play out, and the risks are going to get greater.
So many eyes will be watching what happens at Hangzhou intently. The key unresolved questions are how can governments of 20 of the biggest economies in the world give a sense that economic risks are being managed and that they are aiming ambitiously in their economic policies; and what will be the leadership role of China under Xi Jinping?
Tristram Sainsbury is Research Fellow and Project Director, G20 Studies Centre, Lowy Institute for International Policy, Australia. He is a visiting fellow of Chongyang Institute for Financial Studies, Renmin University of China (RDCY), and at the Kiel Institute for the World Economy.
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