China adds new vitality to global governance during Brisbane G20 Summit
Leaders of the Group of 20 (G20) have promised to work together to lift growth, boost economic resilience and strengthen global institutions upon concluding their summit meeting held in Brisbane, Australia, on November 15-16.
A communiqué of the summit stated that G20 countries would lift their GDP by at least an additional 2.1 percent by 2018. The ambitious goal, if fully met, will add over $2 trillion to the global economy and create millions of jobs, the document said.
"This is the first time that G20 leaders have set a concrete goal for economic growth, and China will play an important role in implementing the action plan," Xiong Aizong, a research fellow of world economics at the Institute of World Economics and Politics under the Chinese Academy of Social Sciences (CASS), told Beijing Review.
As a premier forum for international economic cooperation and decision-making, the G20 comprises 19 of the world's largest advanced and emerging economies plus the EU—accounting for two thirds of the world population, 85 percent of global GDP and 80 percent of global trade.
Commitment to growth
Despite a degree of recovery from the worldwide financial crisis in 2008, global economic growth faces many uncertainties. Major economies need to make concerted efforts to offer new momentum for growth.
Christine Lagarde, Managing Director of the International Monetary Fund (IMF), warned recently that the economic rebound is weaker than the organization envisioned six months ago and that the global economy could be stuck in a sluggish growth rut for a long time.
In the World Economic Outlook report released by the IMF in October, the growth forecast for the world economy was revised downward to 3.3 percent for this year, 0.4 percentage points lower than in the April report.
Against this backdrop, China's pledge to growth will be highly encouraging to G20 leaders, Xiong said.
In his speech at the meeting, Chinese President Xi Jinping said that China's economic growth is an important impetus for global buoyancy. According to estimates made by some international organizations, China is one of the largest contributors to the overall growth strategy of the G20.
"China's contribution to the growth is quite impressive," Xiong said. "As Chinese President Xi pointed out, China's annual increase is equivalent to the economic scale of a moderately developed country."
According to analyses by the IMF, China's economic scale growth in 2014 is $679.4 billion, while that of the United States is $369.5 billion. China's contribution to the world economic scale growth accounts for 27.8 percent, and the United States accounts for 15.3 percent. China and the United States are two major engines of global economic growth.
To meet the goal of 2.1 percent, G20 members will implement over 1,000 measures on lifting investment, expanding trade and boosting employment. China alone pledged to take 134 such measures.
In most years of the last decade, China's economic growth rate exceeded 10 percent. In March, Chinese Premier Li Keqiang in his government work report set the goal of economic growth in 2014 at 7.5 percent.
"In recent years, China has encountered greater challenges in economic development. China needs the slowdown to make a transformation to a healthy and sustainable growth pattern," Xiong said.
Despite a moderate GDP growth, China could further benefit the world economy with a healthy and robust economic structure, according to Xiong. For example, China could increase imports from other economies by boosting domestic demand and develop a low-carbon economy to cope with climate change.
In Brisbane, Xi told G20 leaders that following various domestic reforms, the Chinese economy will maintain its momentum for powerful, sustainable and balanced growth, and will provide the world with greater demand as well as increased market, investment and growth opportunities. The biggest contribution that China can make to the world economy is keeping its own growth on track and its markets open, Xi stressed.
Furthermore, innovation has been increasingly valued by the Chinese leadership. Xi said at the summit that innovation is an important driving force for sustainable growth.
In the last year, China has made strides on deepening reform and adjusting economic structure for steady growth, enhancing China's confidence for participating in global governance as the powerhouse of world economic growth," Xiong said.
Increasing infrastructure investment is a crucial aspect of the world's growth strategies, which G20 leaders endorsed at the summit. The Global Infrastructure Initiative, a multi-year work program, aims to lift quality public and private infrastructure investment as well as create job opportunities and improve productivity.
To support the implementation of the Initiative, G20 leaders also agreed to establish the Global Infrastructure Hub with a four-year mandate.
Chen Fengying, a researcher at the China Institutes of Contemporary International Relations (CICIR), pointed out that the topic of infrastructure investment had been discussed at both this year's Asia-Pacific Economic Cooperation Leaders' Meeting in Beijing and the G20 summit.
Leaders are aware that infrastructure is crucial to growth for not only the Asia-Pacific region but for the entire world, Chen said. In particular, many countries face difficulties financing infrastructure construction, which will limit further development in the field. Chen estimated that by the end of 2030, there would be a shortfall of $70 trillion in funds needed for infrastructure.
Establishing the Global Infrastructure Hub will promote coordination and share knowledge between governments, private sectors, development banks and other international organizations, according to Chen.
However, Xiong noted that the hub cannot function as a direct investor or a decision-making body, and its actual effect is yet to be tested.
In Xiong's view, China has set an example in terms of promoting cross-border infrastructure investment.
China has proposed strengthening connectivity, especially in terms of infrastructure investment, on many international occasions since 2013, which has been met with a positive response from many developing countries.
Proposed by China, 21 Asian countries signed the Memorandum of Understanding on Establishing the Asian Infrastructure Investment Bank (AIIB) in Beijing on October 24. The document specifies that the authorized capital of the AIIB will be $100 billion and the initial subscribed capital is expected to be around $50 billion. The AIIB will be an inter-governmental regional development institution aiming to offer financial aid for infrastructure development along the China-initiated Silk Road Economic Belt and 21st Century Maritime Silk Road across the Asian and European continents.
In July, China together with other four BRICS countries—Brazil, India, Russia and South Africa—agreed to establish the New Development Bank at the Sixth Summit of BRICS countries in Fortaleza, Brazil. The new bank aims to finance infrastructure and sustainable development projects in BRICS and other emerging and developing economies. It will have an initial authorized capital of $100 billion.
In addition, Xi on November 8 announced that China will contribute $40 billion to set up the Silk Road Fund at a dialogue meeting on strengthening connectivity and improving cooperation in the country's neighborhood.
At the Brisbane summit, all G20 member countries again urged to implement the IMF's 2010 Quota and Governance Reform. Leaders said in the communiqué that they are deeply disappointed with the continued delay in progressing the IMF quota and governance reforms agreed to in 2010 as well as the 15th General Review of Quotas, including a new quota formula.
If the IMF's quota can be implemented, emerging economies including China will expand their rights in the organization.
"This is the first time that the communiqué of a G20 summit has criticized the United States for failing to implement reforms of global governance institutions," Chen said. "The current global governance institutions have obvious defects. All G20 members agreed on a reform package to the IMF and the World Bank, yet the IMF's 2010 quota has continually been delayed by the United States."
The United States holds decisive power in IMF, for the country is the largest shareholder of the organization, owning 17 percent of total quotas. In January, the U.S. Congress again declined to implement the IMF's 2010 quota.
"I am not optimistic about the ballot result in the U.S. Congress regarding the IMF's 2010 quota," Xiong told Beijing Review.
U.S. President Barack Obama participated in making the governance reform plan at the G20 summit in 2010; however, conservative members of the congress are opposed to the United States fulfilling the pledge. In addition, Republicans took control of both the Senate and House of Representatives in U.S. mid-term elections. Political partisanship in the United States will make the IMF's 2010 quota prospects even more remote, Xiong said.
"Meanwhile, emerging economies have not halted their steps to pursue a fair and rational international economic order," Xiong added.
BRICS countries agreed to establish the New Development Bank and the Contingent Reserve Arrangement at the Fortaleza summit in July. The long-awaited achievement signaled a big step forward in the group's role in global financial governance, which will also be a necessary supplement to current international finance institutions.
"Reform of global economic governance will be a long-term task. The communiqué is helpful for pressuring the United States to quicken steps on this issue," Chen said. "If this does not happen by the year's end, China hopes the IMF will build on its existing work and stand ready with options for next steps."
China to play host
In Brisbane, Xi announced that China will host the G20 summit for the first time in 2016.
China will become the second East Asian country to host the summit. The fifth G20 summit was held in Seoul, South Korea, in 2010. G20 members take turns hosting the annual summit, and Australia had the opportunity to nominate an Asian country to host in 2016.
Japan was also willing to host the G20 summit in 2016. During the Brisbane summit, Australian Prime Minister Tony Abbott said, "After extensive consultation with the views of other member states, China won overwhelming support in 2016 to be the summit host country."
Many observers believe that China's leadership should match its economic power, and hosting the G20 summit in 2016 is an ideal occasion to demonstrate this, according to Xinhua News Agency.
Xi said that China is confident in fulfilling its role as the chair of the 2016 summit and a member of the management troika of the year 2015 and 2017.
In addition to being an economic heavyweight, China has made a great contribution to the work of the G20 mechanism by putting forward constructive proposals.
Vice Minister of Finance Zhu Guangyao said at a press conference on November 15 that the Brisbane G20 summit received over 1,000 suggestions of reforms and measures, 15 percent of which were contributed by China.
Despite the delayed IMF reform, China has continued to add funds to the organization, Zhu said.
China plays an important role in mending the gap between advanced and emerging economies on reforming global governance, said Zhu Jiejin, an associate professor at Shanghai-based Fudan University.
Advanced and emerging economies have common views on economic growth, but they have different ideas on reforming global institutions. As they recover from the financial crisis, advanced economies are losing interest in reforming global governance institutions, Zhu Jiejin said.
China consistently calls to safeguard interests of emerging economies and enhance their roles in global economic governance. Moreover, China serves as a bridge to promote both advanced and emerging economies in reaching a consensus in the G20, he added.
China's Major Pledges at G20 Summit
Expanding imports of over $10 trillion and increasing investment abroad above $500 billion in the next five years, which will create more demand and job opportunities for world economic growth.
Supporting the G20 in establishing the Global Infrastructure Hub and the Global Infrastructure Initiative, and promoting global infrastructure investment via such initiatives as the Silk Road Economic Belt, the 21st Century Maritime Silk Road, the Asian Infrastructure Investment Bank and the Silk Road Fund.
Adopting the Special Data Dissemination Standards of the IMF to improve transparency.
Publishing data on stockpiles of oil in a more comprehensive and timely manner, in order to help secure the world's oil supply and stabilize international crude prices.
Increasing the share of non-fossil fuels in the primary energy consumption to 20 percent by the end of 2030, and setting up a fund to help developing countries cope with climate change.
Deepening international cooperation on fighting against corruption, establishing an anti-corruption network with G20 member states and building a healthy business environment.