August 27, 2016

Will the Summit of G20 Be a Turning Point in the Development of the World Economy?

4-5 September this year the Chinese city of Hangzhou will host the next summit of “Big Twenty” (G20), at which the leaders of major developed countries and emerging economies will meet for the eleventh time. The Hangzhou summit will be the completion of the previous cycle of working meetings of representatives of the G20 member countries, which took place with the organizational support of the People's Republic of China (PRC).


The Slogan of G20 Summit: For Stable Development of the World Economy

China’s Presidency in the organization of G20 has allowed Beijing to influence the direction of its work this year. According to representatives of the Chinese leadership, China's activity was to create conditions for sustainable global economic growth. On this basis, the Chinese side proposed to hold the summit under the slogan “Towards an Innovative, Invigorated, Interconnected and Inclusive World Economy”.

According to the Chinese side, balanced development of the world economy in terms of its dynamic development requires increased attention to international financial stability by active counteracting the risks in this sphere.

In particular, the 11th G20 summit will consider the  questions to promote global economic growth, including:

  • creation of a system of long-term management of G20, which will allow to move from reacting to crises  to preventing  them;
  • counteracting real and potential risks in the global economy by using innovations in the monetary and fiscal stimulus of economic growth;
  • ensuring stability of the international financial market and reform of financial institutions;
  • international interaction  and cooperation in tax matters (harmonization of tax rules) and investment policy;
  • simplification of international rules and procedures for implementation of technological innovations;
  • supporting  free trade and avoiding  financial discrimination in international economic relations;
  • weakening  the potential for conflict in international relations.

Special attention in the discussion of global issues is planned to be paid to the economic support to the efforts to fight terrorism and extremism that pose a real threat to the stability of international economic relations.


Is the  Development of the World Economy  Possible without Stability in International Politics?

In the context of invigoration of the global economy, China has made intensive efforts to depoliticize the future summit in Hangzhou. At a press conference on August 15 this year,  Chinese Vice Foreign Minister Li Baodong pointed out  that G20 summit would be devoted exclusively to economic issues. Due to this, China intends to prevent the emergence of obstacles to the promotion of Chinese initiatives, which can open up new prospects for economic growth exactly of China. In particular, Beijing is trying in every way to avoid discussion of territorial disputes in the South China Sea, which have significantly worsened this year.

However, complete de-politicization of the meeting of “G20” leaders seems unlikely,  given the expected talks between President  of China Xi Jinping and Russian President V. Putin, to be held on the sidelines of G20 summit. Despite international sanctions, which should make Russia abandon the use of military force in foreign policy and stop the military aggression against Ukraine, the Chinese side pays special attention to the visit of the Russian President to the PRC. According to the Director of the Europe and Central Asia Department of China’s Foreign Ministry Gui Congyou, during a separate meeting the heads of the two countries will discuss the Russian-Chinese relations and the implementation of agreements reached during V. Putin's visit to China in June 2016.

In its turn, Russia is going  to use G20 summit in favor of lifting  of international sanctions due to the creation of conditions for termination of negotiations to resolve the conflict in the East of Ukraine in  the “Normandy Format” and the replacement of the Minsk Agreements with a new, more suitable for Moscow treaty. To this end, the Russian side has arranged  RF President V. Putin’s  meeting with  German Chancellor A. Merkel and French President F. Hollande, which will take place  within the framework of the summit of “Big Twenty”. So,  Russia is continuing actions to discredit Ukraine as a responsible participant of the negotiation process and a reliable partner in international relations.

Besides, on the sidelines of G20 summit, there also will be V. Putin’s  meeting with  the new UK Prime Minister T. May, on which an agreement was reached in a telephone conversation of August 9. The sides will discuss ways to improve bilateral relations, the states’ participation  in settlement of the conflict in Syria, the situation in the Crimea and the conflict in the East of Ukraine, as well as lifting of  international sanctions against Russia.

At the same time, making considerable efforts to qualitatively change international economic relations and obtain support from Asian countries, China keeps developing  its strategic dialogue with India. Thus, during Chinese Foreign Minister Wang Yi’s visit  to India August 12-14 this year,  between Beijing and New Delhi, apart from  China's agreeing to  India’s joining  the Nuclear Suppliers Group, an agreement was reached  to support each other in the conduct of G20 summit and the BRICS leaders’ meeting in Goa (October 15-16, 2016). In accordance with the same agreement, Chinese President Xi Jinping will deliver a speech at the  informal meeting of BRICS leaders at the G20 summit in Hangzhou.

Within the framework of G20 summit, talks were scheduled  between Chinese President Xi Jinping and US President B. Obama. According to the Press Secretary of the White House Josh Earnest, the sides will discuss a number of questions about US-China relations.  This meeting will take place in conditions of heightened tension around territorial disputes in the South China Sea, as well as issues related to cyber security and contradictions in the economic sphere of the two countries.

It is likely that this meeting will be one of the stages of the strategic dialogue between the USA and China, on which will depend the realization of the Chinese initiatives made at the G20 summit. Depending on how Washington and Beijing can  reach mutual  understanding, the  USA’s  position will be determined at the ASEAN Summit and the East Asia Summit (held on September 6-9 this year), which are  expected to discuss the prospects of the Trans-Pacific Partnership project and the territorial disputes in the South China Sea.

Besides, considering the possibilities of stable development of the global economy, the G20 summit participants will have  to discuss possible consequences of  the UK’s  decision to withdraw from the European Union and of the military coup in Turkey. These events have launched the process of establishing new economic and political relations between the countries of the Eurasian continent, which can  increase instability in the international economy.


Economic  Initiatives  Hindered by  Existing Difficulties

Analysis of the results of the working meetings during China’s  presidency of the “Big Twenty” indicate significant problems in international economic relations. Among the major problems, the first places are occupied by a significant gap in the economic development of the G20 Member States and the slow recovery of the global economy. Thus, after a meeting of Finance Ministers and central banks’ leaders of G20 countries in Chengdu (July 23-24, 2016), it  was suggested that  it was too early  to determine the content and the time frame for the program to stimulate the development of the world economy. Based on this, the participants of G20 Summit in Hangzhou may postpone the decision on the implementation of this kind of stimulation.

Also, China's economic policy largely provokes uncertainty in the global economy. During the meetings of  the “Big Twenty” in the current year,  participants expressed criticism about  Beijing’s monetary and fiscal policies, the size of the Chinese steel exports and reduced indicators of development of the Chinese economy.

Besides, the  initiatives, supported by China, can cause negative reaction of the countries that participate in  or are considering joining the Trans-Pacific Partnership project.


G20 — New Opportunities for Developing Countries

Modern development of international relations has become increasingly dependent on the globalization of the world economy in which emerging economies are trying to increase the share of their participation in the “global value chains”. In particular, in the struggle  for economic prosperity,  a considerable part of the “Big Twenty” is trying to secure a place beyond the stage of production, taking place in the new pre-production and post-production stages of “global value chains”.

In fact, this goal can be traced in the  proposed by China theme and content of G20 summit in Hangzhou. It is the construction of innovative, invigorated, interconnected and inclusive global economy that will increase the share of developing countries in high-tech research and development work, design processes, as well as in after-sales services.

At the same time, negative processes in the global economy and developing countries’ desire to strengthen their positions, do not allow us to hope that the  G20 summit in Hangzhou will find solutions to all problems.

With that, it is reasonably believed that the G20 summit will determine the “Big Twenty” countries’ positions on most important issues of the world economy, as well as their readiness to solve common problems during Germany’s upcoming presidency of G20.