In September 2009, the G20 designated itself as the “premier” forum for international economic cooperation. Seven years later, 2016 will be the first year in which China, the world’s second largest economy, will bear responsibility for coordinating the process. It is widely assumed that China’s growing economic strength will translate into political influence. The Chinese government is becoming much more confident about taking an active role in global governance and the G20 is the best platform provided for China to deepen its involvement in global economic governance.
As the chair country of the G20 in 2016, China’s actions will profoundly influence G20’s efforts for coping with economic challenges. According to the 13th Five Year Plan, covering the period 2016-2020, China’s economy will maintain a mid-and-high-rate growth, and China is expected to realize its goal of doubling both national GDP and urban/rural income by 2020 compared to 2010 levels. China’s continued growth will help Beijing play a leading role in facilitating global sustainable development.
From 2008 to 2014, China contributed more than 30 percent of the world’s economic growth. During the latest three years that figure has reached as high as 44 percent. Even in face of 7 percent growth at present, one year’s worth of absolute growth is as much as $800 billion, exceeding the absolute amounts during the double-digit growth era prior to the financial crisis. Thanks to its continued growth, China has served as a “stabilizer” for the global economy. China’s contribution to the global economy so far demonstrates that China is necessary and able to advocate the “innovative, invigorated, interconnected, and inclusive development of the global economy,” which Chinese President Xi Jinping revealed as the main theme for the 2016 G20 Summit at last year’s G20 gathering.Enjoying this article? Click here to subscribe for full access. Just $5 a month.
Innovate Growth Patterns
The world has entered a “new normal,” with many traditional problems far from being resolved while a raft of new problems loom. The interweaving of old and new problems is making the international situation increasingly complicated. The international financial market unrest in 2015 suggests that there is a long way to go toward unraveling global systematic problems. At the same time, a new round of technological innovation and industrial reform is springing up worldwide; emerging markets and developing countries are rapidly pushing forward industrialization. The G20 is faced up with the double goal of coping with globalized risks and seeking new growth momentum.
To cope with challenges and unearth development opportunities, the international community must set up a global innovation system, strengthen global governance, reform global development mechanisms, and create production factors that allow goods and services to flow worldwide. The global community should also strengthen international capacity cooperation and build up a universally-beneficial global industrial chain which fully makes use of all countries’ comparative advantages. These steps will enable the entities, resources, and environments necessary for innovation to flow freely worldwide and offer mutual support and promote mutual development. The G20 should seek to construct new standards for the global innovation atmosphere, so as to forge a win-win, inclusive, and mutually progressive new pattern of global development, expedite the transformation of old and new growth momentum, and lead the global economic recovery.
Improve Global Economic and Financial Governance
Seven years have passed since the financial crisis, and global economic growth remains weak. The global economy is still in a profound adjustment period; quantitative easing policies are only a stopgap measured and economic and financial reforms are still the top concern for global governance. Equal participation and joint decision making between developed and developing countries in the G20 framework is its essential characteristic and strength. The G20 should continue to provide political support for and promote global economic governance reforms, ensuring the reforms seek justice and fairness and improve the representation and voice of emerging markets and developing countries.
Pushed by the G20, reforms of existing international financial institutional are progressing, and the world’s capability for coping with economic crises is increasing steadily. It is worth mentioning that the Asian Infrastructure Investment Bank (AIIB), driven by China, is a beneficial supplement to the existing international financial system, which emphasizes cooperation rather than confrontation, embodying openness, inclusiveness, and constructiveness. As an innovation of the economic and financial governance mechanism, AIIB should serve as an inspiration for the G20.
Construct an Open-Ended World Economy
The key for upgrading the global governance mechanism lies in constructing an open-ended world economy. At present, different countries are at different development phases, which have different strengths for economic development. Constructing an open-ended global economic system and strengthening international capacity cooperation can effectively match different countries’ supplies and demands and realize mutual development between countries at different development levels.
Developing countries are faced with the demands of urbanization and industrialization, but lack technologies, equipment, and infrastructure construction capability. Developed countries need to update their equipment and infrastructure facilities, but are restricted by capital shortages and high costs. As a locomotive of developing countries, China can make full use of its advantages in high cost performance of mid-level equipment, high capability in engineering and construction, and an abundance of foreign exchange reserves to help developing countries and developed countries align their respective capacities. Integrating all these advantages through three-party cooperation can lower costs to satisfy different countries’ various demands, and help each country break through development bottlenecks, enhance industrial upgrades, and push forward the integration of the global industrial chain.
Along these lines, China’s proposal of “One Belt, One Road” is different from earlier free-trade zones. It is designed to bring together all participating countries’ development strategies and realize inclusive and sustainable development via joint consultation, construction, and sharing. Economic globalization binds all countries’ interests closely together, forming a cooperative status quo. Only by opposing trade protectionism; maintaining and strengthening multilateral trade mechanisms; providing adequate room for the development of various countries; ensuring regional free trade arrangements; offering support for multilateral development; strengthening international capacity cooperation; and establishing a new-pattern global value chain can the world economy realize stable and inclusive development.
Promote Inclusive and Interconnected Development
Each country’s development should interconnect with global growth in a bid to realize the optimized allocation of global economic resources, as well as the mutual integration and promotion of the economy, society, environment, and governance. At present, the global economy is still in an adjustment period after the financial crisis, with the former economic development mode being unable to solve the problem of economic structural transformation and sustainable development. Realizing fair, open, comprehensive, and innovative development is not only a moral responsibility but also a necessary requirement for releasing the economic development potential.
The 2030 Agenda for Sustainable Development has set new goals and provided new frameworks for global development. The global community should review the development path in a brand new perspective, implement the 2030 Agenda for Sustainable Development. By doing so, the world can promote the relationship between sustainable development and economic transformation, properly cope with the unequal nature economic development, coordinate to tackle climate change and environmental degradation, enable different countries in different positions on the global value chain to play to their advantages, and share the opportunities of development as is the core significance of inclusive and interconnected development. Through closely combining the 2030 Agenda for Sustainable Development with its own agenda, the G20 should establish a new type global partnership in the global economic governance process. By overseeing the interconnection of macroeconomic policies, the G20 can realize all countries’ mutual development, and make G20 a long-term platform for promoting international economic development cooperation as well.
The global recovery has been progressing slowly since the 2008 financial crisis. The reasons for slow progress are twofold. First, the last round of technological and industrial revolution is coming to an end.
Second, the imbalance in development is far from being solved while the deficits of the existing economic governance mechanism are looming. In spite of this adverse backdrop, China has maintained a relatively high growth rate. China’s long term economic growth performance and sustainable growth potential suggest that it has essential experience in promoting development. China’s hosting of the G20 Summit means that the world will have the opportunity to share the Chinese remedy for realizing sustainable development.
The coming G20 Summit held will link the past and present. If the G20 can set an example for the world in terms of innovation, invigoration, interconnection, and inclusiveness, and form a mutually beneficial and win-win situation, it shall undoubtedly boost global economic confidence, stimulate economic recovery, release development potential, and benefit more people so as to create a bright outlook for the new growth of the world economy.
China has developed the willingness and ability to take on greater role in global governance and is likely to take its G20 presidency in 2016 as an opportunity to strengthen its status as an economic rule setter. Expect China to show more interest in engagement in lieu of practical reforms of the traditional governance institutions. Moving forward, the G20 will continue to facilitate China’s cooperation and coordination with other major powers to expand the country’s interests.
Wang Wen is the Executive Dean of Chongyang Institute for Financial Studies, Renmin University of China (RDCY).