This article is published in collaboration with Project Syndicate.
In just over a month, China will assume the G-20 presidency. Over the next year – and especially at the organization’s September summit, to be held in Hangzhou – China plans to help lay the groundwork for a world economy that is more “innovative, invigorated, interconnected, and inclusive.” The question is how.
One place to look is the current G-20 presidency, held by Turkey, which hasemphasized inclusiveness, implementation, and investment for growth. Though securing consensus within the G-20 is notoriously difficult, the Turkish presidency has had three key successes.
In the last year, Turkey has spearheaded a new accountability framework for efforts to boost growth in the G-20 countries. It has launched a World Small and Medium Enterprise Forum aimed at enhancing the contributions of SMEs to the global economy. And at the recent G-20 summit in Antalya, held just two days after the November 13 terrorist attacks in Paris, a consensus emerged that the fight against the Islamic State is a “major priority.”
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In short, the G-20 has gained some momentum, and China can benefit. If the current United Nations Climate Change Conference produces a binding global agreement to curb greenhouse-gas emissions, that momentum will become even stronger. Given that the G-20 countries represent two-thirds of the world’s population and 85% of its GDP, they would be integral to the implementation of any deal. By providing a framework for these countries to meet regularly to discuss global challenges like climate change, the G-20 – which is, at best, a club of self-selected members – gains legitimacy.
All of this bodes well for China’s capacity to help counter the global slowdown in growth, trade, and investment. And not a moment too soon: The ongoing slowdown is among the greatest risks the world currently faces, because it could exacerbate desperation and instability in already-fragile countries, while compelling more robust economies to turn inward, rather than address proliferating crises.
Fortunately, China has lately been showing its commitment to becoming a more responsible global stakeholder. Perhaps most notable, it recently led the establishment of the Beijing-based Asian Infrastructure Investment Bank (AIIB), which will serve largely as a vehicle for Chinese foreign investment.
Specifically, the AIIB will (among other things) provide funding for China’s ambitious “one belt, one road” policy, which aims to enhance trade linkages throughout Asia, across the Middle East, and into Europe, through massive infrastructure investment. The fact that more than 50 countries signed on as founding members, despite opposition from the United States and Japan, indicates that members’ interest in securing resources to meet urgent infrastructure trumps geopolitical competition.
The same brand of pragmatism was apparent in China’s response to its exclusion from the recently agreed Trans-Pacific Partnership (TPP) trade agreement, spearheaded by the US and including 12 Pacific Rim countries. Instead of grandstanding, China has shown its willingness to pursue different types of trade arrangements, as needed. If China can grasp the opportunity of the G-20 presidency to broker a deal to conclude the World Trade Organization’s long-stalled Doha Development Round, its credentials as a global stakeholder would be enhanced.
To be sure, China might ultimately join the TPP, a move that some Chinese believe would, like accession to the WTO, support domestic reform. But even if China stays out, it seems likely to continue doing its part to enhance trade.
There is more promising news. The Chinese renminbi is poised to join the US dollar, the British pound, the euro, and the Japanese yen in the basket of currencies that determines the value of the International Monetary Fund’s reserve asset, Special Drawing Rights. With the renminbi moving one step closer to becoming a reserve currency, China’s capacity to help the world – and especially emerging-market economies – cope with impending market volatility will be greatly enhanced.
Building a robust, unified, and fast-growing global economy will be extremely difficult even under the most favorable circumstances. It will be impossible if large swaths of the world – most notably, the Middle East – remain mired in chaos and violence. Given this, China could, like Turkey, use its G-20 presidency to promote consensus on the need to end the Syrian conflict and to support long-term peace and economic development throughout the Middle East by pursuing strategies that revive trade, investment, and employment.
In a multipolar world, emphasis on common interests is the key to fostering cooperation and progress. Though the Syrian crisis is undoubtedly highly complex, and the actors involved – such as Iran, Russia, Saudi Arabia, and Turkey – have distinct objectives, no one can deny the economic benefits of social and political stability. Likewise, while the advanced economies may be tempted to pursue austerity, the reality is that stronger growth would benefit everyone, with rising energy and commodity prices lifting the emerging economies out of their current low-growth and debt trap.
Next year, the G-20 has an important opportunity to show that it can deal effectively with global crises, from the risk of secular stagnation to the scourge of transnational terrorism. With the right mix of realism and power sharing, China’s G-20 presidency could catalyze important progress – and perhaps even place a firm foundation beneath a new global economic architecture fit for the twenty-first century.
Publication does not imply endorsement of views by the World Economic Forum.
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Author: Andrew Sheng is a Distinguished Fellow of the Asia Global Institute at the University of Hong Kong and a member of the UNEP Advisory Council on Sustainable Finance. Xiao Geng is Director of the IFF Institute.
Image: A Chinese national flag flutters in front of the headquarters of the People’s Bank of China, China’s central bank, in central Beijing. REUTERS/Petar Kujundzic.