Hope for Hangzhou to work out new path for world economy

By Nathan Gardels | chinadaily.com.cn | Updated: 2016-09-01 11:13

Photo taken on Aug 25, 2016 shows the Hangzhou Olympic Sports Center in the Binjiang district of Hangzhou, capital of East China's Zhejiang province. Hangzhou is the host city for the upcoming G20 Summit.[Photo/Xinhua]

The world economy can't grow without China. And China can't continue growing unless the rest of the world does. This recognition of mutual dependence was the key theme that emerged last November in a discussion in Beijing between China's President Xi Jinping and members of the Berggruen Institute's 21st Century Council.

As host of this year's summit, China's President Xi want to cement the role of the G20 as the governing body which coordinates common policies that foster global growth.

Other Chinese officials have echoed Xi, arguing that the G20 should shift from being a "fire brigade" that only responds to economic emergencies, like the 2008-2009 financial crisis, to a strong proactive institution that can sustain long-term growth initiatives from year to year.

The way it is now, the setting of the annual agenda depends on the priorities of the rotating host without continuity over time which is necessary to be effective.

The discontinuity and lack of follow-up between summits has been so great that Al Gore once called the G20 "clothes without an emperor" in a snide allusion to the stilted group photos of business-suited leaders who rarely rise to the occasion.

At the 2011 Summit in France, then-President Nicolas Sarkozy proposed the establishment of a permanent secretary similar to the United Nations in order to enhance the group's weight and impact. China supported that proposal, which was not successful at the time, and is expected to recommend again this year.

Meeting in Mexico City in 2012 in tandem with the summit hosted by then-President Felipe Calderon of Mexico, the 21st Century Council made two organizational recommendations.

First, they followed up on Sarkozy's idea of a permanent secretariat that would serve an executive troika–the previous, current and future chairs of the G20, thereby ensuring both institutional strength and continuity. The former French president is now a member of the 21st Century Council.

Second, they proposed that the G20 link up with subnational networks at the provincial and municipal levels to enable a decentralized implementation of climate change policies and not just rely on annual summits of top leaders.

On the agenda this year is to invigorate economies beyond exhausted monetary policy which has reached its limit, unable to move the needle on stagnant or weak growth around the world.

After the November meeting in Beijing, China's top economic adviser, Liu He, invited a committee of the 21st Century Council (former British PM) Gordon Brown, Ernesto Zedillo ,Larry Summers, Nobel economists Michael Spence and Joe Stiglitz, Fred Hu, Mohamed el-Erian and (former WTO head) Pascal Lamy--- to offer advice on the upcoming agenda.

The advisory committee's recommendations focused on complementing monetary easing with fiscal stimulus such as government investment in infrastructure and education as well structural reforms, from opening up markets in services to labor market reform that would enable young people to find work.

It also recommended promoting innovation through the application of new technologies to industry. Addressing the "inequality trifecta of income, wealth and opportunity" in both advanced and emerging economies was also emphasized.

At the November meeting, Vice Premier Zhang Gaoli, member of the Standing Committee of the Political Bureau in charge of the economy, laid out the comprehensive dimensions of the plan that will guide China's development over the next half decade.

The new buzzwords in his presentation were "entrepreneurship" and "innovation." Zhang envisions linking up China's manufacturing and infrastructure through the resource and logistical efficiency enabled by the "Internet of Things"—what the Chinese call "Internet Plus."

Indeed, the theme China has chosen for this year's summit is "Towards an Innovative, Invigorated, Interconnected and Inclusive World Economy."

The principal aim of the conclave under Xi's chairmanship will be to "explore more efficient growth models through innovation, improved global economic and financial governance, stronger international trade and investment, and inclusive and interconnected paths of development."

Not insignificantly, Hangzhou was selected as the site of the G20 Summit because it is the home of Alibaba, China's top new economy company founded by Jack Ma and Joseph Tsai.

China's emphasis on addressing the long-term, inter-related causes of weak global growth will make this the most important G20 summit since the 2008-2009 gathering chaired by then-British Prime Minister Gordon Brown. The coordinated stimulus policies agreed on at that time saved the world from depression.

The hope this time is that China's leaders, who oversee the world's second largest economy, can convince the rest of the G20 nations to agree on a path out of the prolonged slump that afflicts the world as a whole.

The author is editor-in-chief of The World Post and Executive Advisor to the Berggruen Institute's 21st Century Council.