Stepping into the spotlight
Updated: 2013-09-06 09:25
By Fu Jing (China Daily)
China needs to play a more pro-active, bigger role in international affairs, say experts
China should play a more proactive role to make the G20 an effective multilateral for fair and balanced global development, experts say.
The G20 meeting in St Petersburg, Russia, they say, is an ideal platform for China to tell the world that it is more than willing to contribute knowledge, resources and experience to realize these goals.
"The rapidly evolving global situation is such that China can no longer afford to take a back seat," says Chi Fulin, president of the China Institute of Reform and Development. "China must play a more active and special role in multilateral mechanisms, especially within the G20."
While China is contributing significantly to global economic growth, Chi says the changing situation requires both emerging economies and developed countries to work together for global development.
"China should be more proactive in global situations and also come up with bolder reforms and restructuring agenda to improve global competitiveness."
G20 members account for more than 90 percent of global GDP and for 80 percent of global trade. Two-thirds of the world's population lives in G20 member countries, while 84 percent of all the fossil fuel emissions are also generated in G20 countries.
"All these figures matter, so China should attach even more importance to this mechanism," Chi says.
Chi says his institute plans to organize an international conference in November to discuss the roles of emerging economies in global governance and the G20. In November, the Central Committee of the Communist Party of China will hold a meeting to discuss the country's reform agenda and the meeting is expected to provide more indications on China's role in the international system.
The G20 itself was born during a crisis. In the aftermath of the 1997-98 financial crisis, which revealed the vulnerability of the international financial system in the context of economic globalization, the G20 was formally established in September 1999 and the finance ministers and central bank governors started to hold annual meetings after the inaugural meeting that December in Berlin.
The first meeting of the G20 leaders took place in Washington on Nov 14-15, 2008, after the start of the 2008-09 financial crisis, and the leaders agreed to an action plan to stabilize the global economy and prevent future crises.
This was followed by meetings in Mexico and the Republic of Korea. The St Petersburg summit is particularly interesting as Russia is a member of BRICS as well as the G8, a club of industrial countries.
Since the Washington leaders meeting in 2008, China has made a number of "indispensable and somewhat underappreciated" contributions to the efforts to rebuild the global financial architecture, says Gregory Chin, an associate professor at York University in Canada.
At the structural level, Chin says China has helped fuel global growth during a period of great fragility for the world economy. "China has helped stabilize the broader conditions within which the reforms to the global financial system have taken place," he says.
Chin says China has also supported the plan to enhance the role and capabilities of the Financial Stability Board, and also favored speedy conclusion of the Basel III agreements on banking and financial supervision. China has also indicated that it would push for speedy implementation of Basel III.
Chin says China has also advocated reforms in the working of the International Monetary Fund and the World Bank, among other key global financial institutions.
"The changes have not only been in quota shares, and voting power, but also in the balance of power in decision-making between the traditional powers and the emerging and developing economies," Chin says.
Chin feels that since 2008, the changes China has advocated have helped restore a sense of legitimacy to the two Bretton Woods institutions and changed the global approach to lending.
"The changes that affect the legitimacy and the effectiveness of global financial institutions are really important for the future of these institutions and the global architecture," Chin says. "China and the emerging economies should continue their efforts."
Equally important, China can strengthen its role in the World Trade Organization, he says.
"China has very capable trade officials. Similar to its move toward bolder diplomacy in the G20, the IMF and the World Bank, China could move toward a more prominent co-leadership role in the WTO," Chin says. "Such a move would mean that China would be more proactive in shaping the global trade agenda."
Chin says taking on such global leadership may mean some sacrifices of Chinese national interests for the greater global good, but it could also mean gaining some new agreements, and so-called guarantees, against punitive protectionist measures that could hurt China.
But Chin is dissatisfied with the G20's performance as a whole, though China and other emerging economies have contributed a lot. The G20, in its current form and based on recent results, is in crisis, he says.
"If the current trends continue, then there are real reasons for the most senior political leaders to question why they should continue to attend the G20 meetings; that it may make sense to have the G20 revert to central bank governors and finance ministers."
Chin says for the G20 to survive as a leaders' summit, it needs to show it is adding value, delivering what cannot be delivered at the G7, or BRICS summits, and this means new ideas, new leadership, leading to new breakthroughs on the core agenda.
"It is not possible by expanding or diluting the agenda to divert attention from the fact that little is being achieved despite the major investment of resources and time," he says.
"Without changes, a new G20 office does not mean much, except for some logistical coordination support for each year's host," says Chin, asked whether it is feasible to set up a residential office for the G20.
If the G20 can be put on a new footing, with fresh thinking on the core agenda, then a new office would be helpful, and the exact role for the office needs to be thought through carefully, especially its role beyond logistical coordination, Chin says.
"It would be nice if China was willing to host the new office, but I actually think that a neutral site might be the most suitable one for all involved," Chin says, adding that locations like Singapore, which is a key international financial center, and already hosts the office of a number of international organizations, are ideal.
Chin says the timing may not be right, politically, for the BRICS countries to set up a residence office or coordinating office at this stage in the development of the BRICS grouping. "With only five members, the coordination burden should not be too high," he says.
It is much more important for the BRICS to reach an agreement on the location for its BRICS-led development bank proposal, which they signed in South Africa earlier this year.
"Settling the location issue is one of the main hurdles for the grouping to overcome in establishing the BRICS development bank," says Chin, pointing out that there are other issues as well, including the details of the co-financing, voting share and decision-making arrangements and procedures, senior staffing decisions, and lending decisions in terms of intra-BRICS versus more broadly across the developing world.
China's growing role in the international system has also attracted the attention of the United Nations. Before the G20 summit, the UN Development Programme in China had published a report, calling for significant reform to global governance institutions to give better representation to emerging nations.
The report identifies three main challenges to global governance: the altered balance of global power caused by the economic rise of emerging nations such as China; the proliferation of globally shared issues such as climate change and financial instability; and a need to ensure the legitimacy and accountability of global public goods.
The report suggests China can serve as bridge between developed and developing countries, and help developing countries to be better heard in the dialogue on global issues. It argues that China has emerged as one of the leading voices of reform to spur collective action on various global issues.
Bluford Putnam, chief economist of CME Group in Chicago, says China has a great opportunity to expand its role. "It is now in China's own economic interests to more fully integrate its financial markets with the rest of the world. It can realize a faster renminbi normalization, while more investment in/out flows will enhance China' standing in the global community and give it an even greater ability to influence global policy initiatives."
Two men walk on a square inside a newly-built commercial complex in Beijing. As China contributes significantly to the global economic growth, it should have a bigger say in multilateral mechanisms, experts say. Kim Kyung-Hoon / Reuters
(China Daily European Weekly 09/06/2013 page8)