Blog Post

China’s political agenda for the G20 summit

Chairing the G20 offers China a unique opportunity to set the tone in global economic debates, and the Hangzhou summit is the focus of attention. The author predicts that trade, structural reforms and a bigger global role for China will be Beijing’s three priorities. But how realistic are these goals?

By: Date: August 22, 2016 Topic: Global Economics & Governance

China will host the next G20 summit on 4-5 September in Hangzhou. With the clock ticking, the world waits to see how China will use the meeting to promote its domestic development agenda and shape global economic governance. I predict China will have three key aims: strengthening its international role; promoting trade openness; and a global policy agenda of structural reforms coupled with fiscal support for demand.

China will have three key aims: strengthening its international role; promoting trade openness; and a global policy agenda of structural reforms coupled with fiscal support for demand.

I draw these concrete aims from China’s stated themes for its G20 Presidency, namely growth, interconnectivity and inclusiveness. A Chinese saying claims that “Hangzhou is heaven on earth”, and the Chinese authorities will likely take advantage of this “paradise” to achieve their political goals. But are their objectives too far-fetched? Progress is difficult, especially at a time when the global economy is sluggish and stuck in a swamp where monetary policy seems to have lost its effectiveness. Only fiscal weapons are left, but that is only for the few fortunate economies which still have space. To judge just how realistic China’s targets for September’s G20 meeting might be, here is some detail on each of them.

Firstly, external trade is vital to support global growth — but especially growth in China. It is hard to find a country that has benefitted more from trade than China. Even though Beijing is rebalancing towards a consumption-based economy, China still needs to export at full capacity to keep growth at a high enough level. Protectionism is therefore one of the major risks to China’s successful economic transition. After the demise of the Doha round, and with China’s hugely increased negotiating power, bilateral trade agreements seem to have become China’s key policy tool to avoid protectionism. In any event, the G20 is a good place to remind global leaders of the importance of multilateralism and to widen the gains from international trade, which is still clearly in China’s interest.

The Chinese government will surely assert China’s relevance in global affairs and challenge the status quo.

Secondly, China’s keen desire to strengthen its soft power will be on display at the G20 summit. In fact, the Chinese government will surely assert China’s relevance in global affairs and challenge the status quo. The G20 is a perfect venue to do this, because emerging countries are an integral part of the group and this naturally weakens US dominance. Emerging economies are likely to support China’s wider global role at the G20 meeting, especially because two of the key topics on the agenda (the Paris Agreement on climate change and the financing of the global infrastructure gap) should bring emerging countries together with a relatively united position. It goes without saying, however, that renewed tensions in the South China Sea may overshadow such common interest. There is a risk that countries will fear an increasingly revisionist China. That being said, China will probably use the summit to showcase its new international institutions, both the Asian Infrastructure Investment Bank and the New Development Bank. Beijing will also want to promote its massively ambitious Belt and Road Initiative. The massive figures for Chinese outward direct investment, which have only accelerated since the beginning of 2016, are another sign of China’s rapidly increasing clout in the world, which supports a bigger role in the international financial architecture.

In the point of view of the Chinese government, high growth can be maintained through lax demand policies

Finally, China’s third key goal will be to stress the need for structural reforms while maintaining high growth. In the point of view of the Chinese government, high growth can be maintained through lax demand policies. In the absence of monetary space at the G7 level, the recipe is fiscal expansion for as long as there is space. For emerging economies, China will probably push for both. On structural reforms, President Xi’s latest push for a reform agenda, at least nominally, was outlined in the 13th Five-Year Plan. This should also serve as a basis for China’s call for structural reforms at the G20, so as to increase productivity at the global level. This point seems particularly important to me, because the developed world faces a number of challenges, such as high debt, low return on investment and an aging population, which only a productivity boost can overcome.

In short, we should expect China, as host of the upcoming G20 summit, to push for three key objectives, namely trade openness, a larger international role and structural reforms with lax demand policies. All three should find enough support from G20 participants, and thus appear in the communiqué. The real question, however, is how the G20 will really operationalise these objectives in the future.  That is where China may have much less leeway, given the inter-governmental structure of the G20 and the lack of operational independence that such a body enjoys.

 


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint. Anyone is free to republish and/or quote this post without prior consent. Please provide a full reference, clearly stating Bruegel and the relevant author as the source, and include a prominent hyperlink to the original post.

View comments
Read article More on this topic More by this author

Opinion

Can Multilateralism Adapt?

Global governance requires rules, because flexibility and goodwill alone cannot tackle the hardest shared problems. With multilateralism under attack, the narrow path ahead is to determine, on a case-by-case basis, the minimum requirements of effective collective action, and to forge agreement on reforms that fulfill these conditions.

By: Jean Pisani-Ferry Topic: Global Economics & Governance Date: July 3, 2018
Read article More on this topic More by this author

Blog Post

US tariffs and China's holding of Treasuries

China has the biggest bilateral trade surplus vis-à-vis the US but is also a top holder of US government bonds. While China has started to counteract US trade tariffs, economists have been discussing the case of China acting on its holdings of US Treasuries. We review recent contributions.

By: Silvia Merler Topic: Global Economics & Governance Date: July 2, 2018
Read about event More on this topic

Past Event

Past Event

Trade war trinity: analysis of global consequences

Analysis of the long-term impact of the trade war and its three key players: EU, US, and China.

Speakers: Alicia García-Herrero, Ignasi Guardans and Carl B Hamilton Topic: Global Economics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: June 28, 2018
Read article More on this topic

Blog Post

China’s strategic investments in Europe: The case of maritime ports

The EU is currently working on a new framework for screening foreign direct investments (FDI). Maritime ports represent the cornerstone of the EU trade infrastructure, as 70% of goods crossing European borders travel by sea. This blog post seeks to inform this debate by looking at recent Chinese involvement in EU ports.

By: Shivali Pandya and Simone Tagliapietra Topic: Global Economics & Governance Date: June 27, 2018
Read article More on this topic

Blog Post

The G7 is dead, long live the G7

The summit in Charlevoix left behind a Group of Seven in complete disarray. The authors think that the G-group, in its current formulation, no longer has a reason to exist, and it should be replaced with a more representative group of countries. In this fast-changing world, is the G7 only a relic of the past?

By: Jim O‘Neill and Alessio Terzi Topic: Global Economics & Governance Date: June 13, 2018
Read article Download PDF More on this topic

Working Paper

European and Chinese trade competition in third markets: the case of Latin America

While Europe continues to hold important trade powers, the rise of China in the global economy has significantly reshaped international trade and competition. In this paper, the authors show that the degree of competition between both powers in Latin America has risen in the past decade due to China's increased trade of high-quality products. They address whether China is an increasingly relevant competitor for Europe in Latin America and in which sectors China-EU competition is fiercer. These findings should be a wake-up call to Europe in its quest to remain competitive at the global level.

By: Alicia García-Herrero, Thibault Marbach and Jianwei Xu Topic: Global Economics & Governance Date: June 7, 2018
Read article More on this topic More by this author

Blog Post

China’s new role in the global economy

The changing role of China in the world economy has recently been highlighted by its registering of a first current account deficit in 17 years. We review the economists’ analyses of this new role and associated challenges.

By: Nicolas Moës Topic: Global Economics & Governance Date: May 28, 2018
Read about event

Past Event

Past Event

Where is China’s financial system heading? Implications for Europe

How ready is China for the transformation of its financial system and how will this effect Europe?

Speakers: Elena Flores, Alicia García-Herrero, Gene Ma, Hu Yuwei and Guntram B. Wolff Topic: Finance & Financial Regulation, Global Economics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: May 25, 2018
Read article Download PDF More on this topic

Working Paper

How big is China’s digital economy?

The rise of influential Chinese digital giants, including Baidu, Alibaba, Tencent and Xiaomi has shown the world that China is a global leader in digital innovation and it is not surprising that China has started to influence the global digital market. But is China exploiting its full potential in this area? To answer this question, the authors assess how big China’s digital economy is relative to the rest of its economy, and how China performs compared to the rest of the world.

By: Alicia García-Herrero and Jianwei Xu Topic: Global Economics & Governance Date: May 17, 2018
Read article More on this topic More by this author

Blog Post

Trade war: How tensions have risen between China, the EU and the US

The multilateral trading system has been challenged by unilateralist measures and subsequent threats of retaliation. We collect the main events that have shaped the current situation and show which trade flows have been and will potentially be affected by the various measures. We end by discussing possible scenarios moving forward for the EU.

By: Francesco Chiacchio Topic: Global Economics & Governance Date: May 15, 2018
Read article

Opinion

China’s financial opening: Will it be different this time?

It is hard to judge whether China will indeed carry out a substantial opening of its financial sector, despite the significant external pressure it faces from countries such as the United States to liberalise its economy.

By: Alicia García-Herrero and Gary Ng Topic: Finance & Financial Regulation, Global Economics & Governance Date: May 9, 2018
Read article More on this topic

Opinion

Germany’s export-oriented economic model is caught in a US-Chinese squeeze

The new Merkel government has to reduce the dependencies on exports by stimulating domestic growth forces in Germany and Europe. At the same time, Berlin should push for a more ambitious national and European innovation policy as well as a robust European foreign trade policy.

By: Sebastian Heilmann and Guntram B. Wolff Topic: Global Economics & Governance Date: April 30, 2018
Load more posts