G20 summit should adopt sound mechanisms to push for financial stability and better coordination among key powers

Amid economic instability in Europe and a fluctuating euro fuelled by the sovereign debt crisis in Greece and other European countries, the G20 summit, due to be held in Toronto, Canada at the end of this month, is entrusted with the overwhelming task of enhancing policy coordination among major world powers and promoting stable recovery of the global economy.

At a meeting of G20 finance ministers in Washington in April, participants agreed that the world economy had achieved unexpected recovery.

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However, such optimism was soon dampened by the Greek debt crisis, which spread along the Mediterranean and to some Central and East European nations, causing the euro to be devalued and global stock markets to plummet.

In addition to the chain reactions it has sparked across emerging markets, chaos in Europe has also disrupted the pace of global economic recovery and blurred its prospects.

That also explains why the Pusan meeting of G20 finance ministers and chiefs of central banks, convened early in June, gave top priority to coordinating economic recovery between developed and developing countries, along with efforts to reconstruct global financial institutions and tighten financial regulation.

Since the outbreak of the global financial tsunami triggered by the collapse of Lehman Brothers in 2008, emerging economies like China have acted as the new engine of the global economy and played a big role in promoting its recovery.

But one and a half years after the global crisis, signs of economic overheating and inflation bubbles have emerged in these emerging countries. How to effectively curb these tendencies is an intractable and pressing task for them in order to maintain stable growth.

The US, Japan and other developed countries have to some degree shown economic recovery under the effect of a series of stimulus packages and some market factors.

However, this "positive" economic data, indicated by industrial production and export volumes, have not changed the fact that developed countries are under renewed risk of deflation in the context of the pervasive sovereign debt crisis in European countries and a turbulent euro.

In developed markets, the scale of fund-raising by enterprises through the issuance of securities and shares has almost declined to the level it did shortly after the collapse of Lehman Brothers.

The debt crisis in Europe, which has been intertwined with the banking system, has increased the continent's financial risk. Banks' reluctance to lend has also added to the economic shrinkage.

The emerging deflation in developed countries, along with growing inflation in developing ones, has plunged the world into a "double dip" economic landscape, which is unfavorable for simultaneous recovery of the developed and developing countries.