G20 2016 Hangzhou Summit – What to Expect?

By Gordon Chi Wing Lam,

Advisor, Li & Fung Development (China) Limited

The Group of Twenty or the G20, is the premier forum for international economic cooperation and an important mechanism for global economic governance. The G20 is entrusted with the critical mission of addressing economic risks and challenges, promoting world economic growth, improving global economic governance and sharing development benefits amongst people across the world. It is committed to an open world economy with a strong partnership among members and beyond. China will assume presidency of 2016 G20 Summit in Hangzhou city during September 4 & 5, 2016, just 3 months away from now.

The Chinese economy has entered a new normal and a period of transformation and upgrading. The world economy has also come to a new stage of profound adjustment and change. The Chinese economy growing at a medium-high speed is an important source of growth for the world economy. Steady growth of the world economy in turn will provide a favorable external environment for China's development.

With this backdrop, as the host country of the G20 Summit, China must provide a good answer to the question of how to combine its own development needs with the need for cooperation in the world so that the Hangzhou Summit can be an international event with distinct Chinese features. China and its economy have become an integral part of the world and the world economy in a community of shared destiny with deeply intertwined interests. The G20 Hangzhou Summit will be an important opportunity for China and the world to understand, adjust to and shape the new normal. It will enable China to better combine external economic cooperation with its domestic reform and development and invite the world to join China in opening up new vistas of innovative, coordinated, green, open and shared development and striving for a new era of global growth.

The theme and key agenda items of the G20 Hangzhou Summit are highly aligned with these ideas, and reflect not only China's own development needs, but also the common needs of international economic cooperation and the institutional transition of the G20. Hosting the G20 Hangzhou Summit will be an important platform for putting China's vision and propositions into practice. It will also add further impetus to the process of implementing the 13th Five-Year Plan, which envisions a China that works for improvement of the international economic governance system and promotes a more equitable and fair international economic order leading to greater win-win cooperation. It also calls for efforts to enhance international coordination on macro-economic policies and promote global economic balance, financial safety and stable economic growth.

The theme for 2016 G20 Summit is “Towards an Innovative, Invigorated, Interconnected and Inclusive World Economy”. There are a few key highlights to eye on:

Firstly, G20 members will explore ways to maintain the momentum of world economic recovery since the international financial crisis in 2008, enhance coordination to increase the synergy of their policies and reduce negative spill-overs, maintain financial market stability, increase investment and consumption, and jointly boost global economic growth. G20 needs to enhance cooperation on innovation, including innovation in science and technology, in development concept, institutional arrangements and business models, to explore new growth engines of the world economy. G20 needs to continue structural reforms to lift total- factor productivity and potential output, and expand growth boundaries. G20 needs to advance the emerging new industrial revolution, taking full advantage of new technologies and new organizational models in industrial production to lift domestic production and create more jobs. The G20 should strengthen industrial development cooperation, especially in digital economy, to seize the new opportunities and maximize the benefits for all.

Secondly, The G20 should work together to continue financial sector reforms by establishing a more stable international monetary and financial system, improve macro-prudential management, facilitate orderly cross-border capital movements, strengthen global financial safety net, and promote orderly sovereign debt restructuring. In order to enhance the stability and resilience of global financial system, the G20 needs to continue the reforms in global financial sector, implementing standards and rules already agreed and further the work on setting standards. Meanwhile, the G20 should continue to be vigilant on new risks and vulnerabilities of the global financial system, and ready to take timely measures in response. Developing green finance is another important area in supporting the transition into a green global economy, G20 needs to explore ways to encourage greener financial institutions worldwide, and improve the capacity of capital markets in channeling resources to green industries, thus developing the environment-friendly economy. Improving the tax regime to enhance global tax cooperation in combating tax evasion and avoidance, and implementing a general consensus on Anti-corruption are also among the agenda of this year’s G20 Summit.

Thirdly, it is about global trade and investment. Trade and investment are important engines for growth and jobs creation. There is growing concern over the persistent decline in global trade growth, to levels below the global growth rate in the past three years. Protectionist measures in trade and investment have been rising significantly, and the Doha Development Agenda has remained in the doldrums for years. Worldwide, regional trade agreements and bilateral investment agreements have flourished. While this has promoted trade and investment liberalization and facilitation, it also results in “fragmentation” in global trade and investment governance regimes, to which G20 needs to respond.

In recent years, the G20 has had fruitful discussions on opposing protectionism in trade and investment, strengthening the multilateral trading system, integrating developing countries and Small and Medium Enterprises (SMEs) into Global Value Chains (GVCs) among others, and made a series of political commitments at previous summits. The significant slowdown of global trade growth has weakened the role of trade as an engine of growth, heightening the need for G20 to strengthen its trade and investment agenda. In Antalya, G20 leaders asked their trade ministers to meet on a regular basis and agreed on setting up a supporting working group. Apart from discussing efforts in reinforcing trade and investment cooperation mechanism, supporting the multilateral trade system and promoting global trade growth, this year’s G20 will put an emphasis in promoting inclusive and integrated global value chains (GVC). GVCs have entered a new phase of adjustment. To achieve sustainable development of the world economy, global trade and investment facilitation and the participation of developing countries in GVCs need to be improved. The G20 should work toward the GVCs that benefit all, and explore the possibility of formulating initiatives aimed at strengthening capacity building and policy coordination to substantially improve participation of SMEs, as well as developing countries, in GVCs and their capabilities to trade and invest. Moreover, the G20 needs to build a rules-based GVCs system that is both consistent and inclusive.

Finally, to help developing countries achieve economic development is not only the moral responsibility of the international community, but also an effective way to address weak global growth. Inclusive and Interconnected Development has long been at the top of the G20 agenda, and the Development Working Group has been established to explore greater growth potential in developing countries. The G20 strongly supports the 2030 Agenda for Sustainable Development, and has achieved significant outcomes in infrastructure investment, food security, taxation, financial inclusion, human resource development, etc. and will work further details in the implementation. On the other hand, Infrastructure is a common challenge for global development, with the lack of finance as the main bottleneck. The G20 should continue to promote private investment for infrastructure by exploring diversified and innovative financing approaches, developing market-oriented financial instruments, such as PPP, capital market, institutional investor, etc. The G20 should further promote global infrastructure connectivity, and amplify the positive externality of infrastructure as a public good.

The other inclusive development issues to be discussed during the 20 summit will include Promoting Accessible, Affordable and Sustainable Energy Supply, increasing employment especially for women and the youth, improving food security and nutrition, mobilizing climate finance, eradicating poverty, and supporting industrialization in Africa and other developing countries.

Apart from the main summit during Sep 4-5, 2016. 4 Sherpas’ Meetings will be held before the Summit for preparation, and one after the Summit on follow-up. Meanwhile, 4 meetings will be held for Finance Ministers and Central Bank Governors, and 6 for finance deputies (including one for communique drafting) to move forward the financial agenda. In addition, the G20 trade/employment/energy/agriculture ministers meetings as well as relevant working groups meetings will also be held separately to promote cooperation in respective areas and prepare deliverables for the Summit.

The G20 is in fact the first global mechanism that allows developed and developing countries alike to take equal part in global economic governance, something that used to be the monopoly of developed countries. This represents a progress in the evolution of global governance and renders the G20 a bridge that connects history with the future, and developed countries with developing countries. Given the current world economic situation, the bridge bears some new implication for the Hangzhou Summit. It implies a keen hope for the G20 to become a bridge in the global economy, a bridge that brings parties together in win-win global cooperation oriented toward the future. The symmetrically curved lines in the bridge are meant to be reminiscent of fiber-optic cables, referring to an interconnected world in an information age. It is our hope that the Hangzhou Summit will serve as a bridge through which countries will build stronger links with each other and together open up broader prospects for the world economy.

Source: Global Value Chain and China Trade in Value Added Database,Ministry of Commerce