Amita Batra
The eleventh meeting of the Group of 20 countries (G20) was held in the city of Hangzhou in China, 4-5 September. This was the first ever meeting of the group in China and the second in Asia after the 2010 meeting in Seoul. The theme of the 2016 G20 summit meeting was “Towards an Innovative, Invigorated, Interconnected and Inclusive World Economy.” The agenda was all encompassing and consistent with China’s own priorities and vision, as outlined in the proposal for its 13th five year plan that identifies innovation as the main growth driver. A blueprint for innovation, digital economy development and cooperation initiative was adopted by the leaders at the summit. The joint communiqué similarly emphasized the role of innovation in providing a push to the sluggish world economy and also in the resolution of global imbalances, ensuring along the way a cleaner environment by giving a call for ratification of the Paris agreement to all member countries. Long running issues of global governance like quota reform at the IMF were included alongside others that have found place on the agenda, of and on, in earlier years, like those related to the Doha Development agenda of the WTO as also those seeking cooperation among existing international financial organizations and the emerging regional financial initiatives. The spirit of inclusiveness was well reflected not just in the development context but also in the larger than ever before guest participation from many non member developing country representatives invited to the summit.
As such, therefore, the G20 Summit in China is seen as successfully having discussed the many diverse issues that are currently of concern to the developed and developing countries. But, is that really the objective of the G20? Is the expanding agenda of the summit not a deviation from the original motivation with which the G20 was created? In fact, the specific task of ensuring global financial stability continues to be as relevant and important in the current context as it was when the group was set up. And perhaps, it would have been most appropriate to address the issue of global financial stability and contagion with the Chinese as hosts of the Summit this year. A brief reflection below on these aspects may help us better review the scope and direction of the recently held G20 Summit.
The G20 was set up as an informal dialogue forum in 1999 primarily to address the challenges to international financial stability that had arisen in the wake of the East Asian financial crisis in 1997. The composition of the forum was not just representative of all regions of the world and the Bretton Woods institutions but also an acknowledgement of the growing contribution of the emerging market economies to global growth and trade. As a consequence it was considered an innovative step forward in global financial governance despite the constant debate on its legitimacy. Subsequent G20 meetings retained the focus on financial stability but did not shy away from discussing regional economic integration, financial markets, capital inflows, banking sector norms and other such issues in support of the process of globalization. In 2008, when the world was struck by the onset of global financial crisis, the G20 underwent a transition from a meeting of the finance ministers and central bank governors to a summit level meeting of the heads of state. The 2008 summit, called by the US President, not just lent greater legitimacy to the forum but also to the institutionalization of a cooperative framework to confront and combat financial challenges of a global magnitude. Over three quick and successive summits that were held in a span of a year in 2008-2009, the G20 member economies were able to evolve a cooperative and coordinated response to the contagion impact of the financial crisis. Alongside, global financial regulatory reform and resolution of global imbalances continued to be a part of the agenda in these meetings.
Today, as the world continues to grapple with the consequences of the global financial crisis and uncertain growth, it would only have been fair for the 2016 meeting to take up for discussion the slowdown of the fastest growing economy prior to the crisis, that is the Chinese economy, and its spill-over implications for the Asia Pacific region. China’s economic slowdown, with structural changes accompanying the move away from an investment led growth strategy towards a consumption led growth path and the underlying shifts in comparative advantage are bound to have spill-over implications for the region and the global economy. Financial sector weaknesses, particularly in the banking sector may also be reinforced as the Chinese economy moves to a new normal. The Asia-Pacific region is most likely to feel the impact as trade and production links with China-centric value chains are intense and complex for the member economies. While the impact may differ across the region depending on the nature and extent of inter-linkages with the Chinese economy and of the real and financial sector, there is no doubt that the developments need to be closely watched and the world needs to be prepared for any eventualities. Having been caught unawares when China chose to undertake a currency devaluation exercise earlier in this year and middle of last year, a coordinated approach to containing and preventing financial volatility as also seeking transparency of policy reform in China as an outcome of the G20 2016 Summit would have done justice not just to the objectives of the G20 but also to its representative character vis-à-vis the world economy.
No comments:
Post a Comment