In Hangzhou, China began the push for G20 to overcome protectionism and fuel global growth prospects. That is vital to reverse stagnation in advanced economies and slowdown in emerging nations.
On September 4-5, the leaders of the G20 economies met in Hangzhou. The summit had great symbolic importance that was easily understood in emerging economies but largely ignored in advanced economies.
Although economic gravity has been in emerging Asia for decades and the emerging world has fueled global growth prospects for nearly a decade, this was the first time that the G20 truly met in the territory of the future.
Nevertheless, international media, which remains headquartered in rich economies, focused on the sensational, whether it was a misreported snub of President Obama, speculative rumors about diplomatic jostling, inflated hopes associated with bilateral meetings, or British Prime Minister Theresa May’s red suit.
In reality, the G20 summit was set to achieve two main objectives.
Overcoming protectionism in the short-term
The G20 final communiqué focused on struggle against tax evasion; accelerated efforts to push international trade and investment; fiscal stimulus and innovation to boost economic growth; and strengthening support for refugees. Indeed, Hangzhou sought to reverse was the eclipse of global economic integration.
In the past half-decade, advanced economies have sustained a semblance of stability, by relying on historically ultra-low interest rates and massive injections of quantitative easing. The QE measures exceed $12 trillion, $10 trillion in negative-yielding global bonds, and there have also been 660 interest rate cuts since the collapse of Lehman Brothers in 2008.
Yet, global prospects remain dim, advanced economies are amid secular stagnation and emerging economies are coping with slowdown. Global economic integration – as measured by world trade, investment and migration – has been paralyzed.
World export volumes are not just growing more slowly, but falling; not least because of trade restrictions imposed by certain G20 economies in key product categories. Meanwhile, global foreign direct investment (FDI) remains well behind the global crisis levels of 2008. Finally, global migration continues to linger.
“We aim to revive growth engines of international trade and investment,” President Xi Jinping said in a closing statement. “We will support multilateral trade mechanisms and oppose protectionism to reverse declines in global trade.”
During the summit, leaders from the world economies agreed to oppose protectionism. In the coming months, they will have to walk the talk.
Pushing emerging growth in the medium-term
A day before the summit, President Obama and President Xi announced the ratification of the Paris Agreement of the 2015 UN Climate Change Conference. Since the US and China represent 20 percent and 18 percent respectively of global carbon dioxide emissions, the two can push efforts against global warming in both advanced and emerging economies.
Initially, global climate change initially evolved in advanced economies, which industrialized in the 19th and early 20th century. Today, it is hurting disproportionately emerging and developing economies, which are still amid industrialization.
Ironically, while the G20 accounts for two thirds of the world population, 85 percent of global GDP and 80 percent of international trade, it, too, has served mainly the interests of advanced economies. The G7 nations comprise less than a tenth of the world’s total population, but they continue to account for almost half of the world economy.
As the G20 host, China has set a different tone, starting in May, when Foreign Minister Wang Yi said that Beijing intends to cooperate with other G20 countries to deliver ten outcomes. In particular, China’s goal is to “initiate cooperation to support industrialization of Africa and least developed countries (LDCs).”
Given its rising economic and political position in the world economy, China is seen as a more credible “broker” to leverage power between advanced, emerging and developing countries, including the least developed countries.
Starting in Hangzhou, for the first time, emerging and developing economies may have a bigger voice in the global economy. It is a very, very belated start of a long effort to transform global governance.
Dr. Dan Steinbock is Guest Fellow of Shanghai Institutes for International Studies (SIIS). This commentary is based on his SIIS project on “China and the multipolar world economy.” For more about SIIS and Dr Steinbock, see http://en.siis.org.cn/ and http://www.differencegroup.net respectively.
A slightly shorter version was published by Shanghai Daily on Sept 9, 2016