G-20 Summit held in Hangzhou, China, is of immense geo-economic importance. Beijing from the start treated the G20 very seriously; this was designed as China’s party, not the declining West’s and much less Washington’s.
Outlining the agenda for the discussions, President Xi Jinping went straight to the point also geopolitically, as he set the tone: “The outdated Cold War mentality should be discarded. We urgently need to develop an inclusive, comprehensive, cooperative and sustainable new security concept.”
Compare it with Xi’s “four prescriptions” – “innovative, invigorated, interconnected and inclusive” – necessary to re-boost the world economy. Acting like the de facto World Statesman-in-Chief, Xi then proceeded at the summit opening to introduce a quite ambitious package – the result of excruciating planning for months in the run-up to Hangzhou.
The package is designed to propel the global economy back to growth and at the same time install more made in China-friendly rules for global economic architecture and governance.
The target could not be more ambitious: to smash mounting anti-trade and anti-globalization sentiment, especially across the West (from Brexit to Trump), simultaneously pleasing his select audience – arguably the most significant gathering of world leaders in China’s history – yet at the same time, in the long run, aiming at prevailing over US-led Western dominance for good.
That’s a predictable but still remarkable turnaround for China, which benefited like any other nation from globalization – with growth over the past three decades mostly propelled by foreign direct investment and a deluge of exports.
Yet now geo-economics has reached an extremely worrying zone of turbulence. Since the end of the Cold War in 1989 – and of “history” itself, according to academic simpletons – it’s never been so dire. Greed led globalization to be “defeated” by inequality.
In a nutshell, low inflation – due to global competition – led to the proverbial “expansionary” monetary policies, which inflated housing, education and health care, squeezing the middle class and allowing unlimited wealth flowing to a 1 percent minority of asset owners.
Yet even in de-acceleration, China was responsible for more than 25 percent of global economic growth in 2015. It remains the key global turbine – while at the same time carrying the self-attributed burden of being the representative of the Global South in global economic governance.
China’s outbound investment surged 62 per cent to a record US$100 billion in the first seven months of 2016, according to China’s Ministry of Commerce. But there’s a problem, which economists have dubbed “asymmetric investment environment”: China remains more closed than other BRICS members to foreign investment, especially in service sectors.
The BRICS-dedicated meeting on the sidelines of the G20 was not spectacular per se. But that’s where Xi detailed China’s G20 agenda and set the tone for their 8th annual summit in Goa next month.
According to a report by the BRICS Economic Think Tank at Tsinghua University in Beijing, China must improve these multilateral connections to “have a bigger say and push the West to step back on international rule making”.
It’s a long shot – but it’s already in progress. Zhu Jiejin, from Fudan University in Shanghai, sums it all up; “BRICS is a test of China’s new philosophy in international relations – although the fruit will take a long time to ripen Take, for instance, the seats at the G20 table; classic Ming dynasty tai-shi chairs (“the seats for imperial grand masters”) with soft grey cushions; paper scrolls with light green jade paperweights at either end; a pottery plate with a pen; a green porcelain teacup; a square jade “seal” – almost as large as an imperial seal – which was in fact a microphone switch.
IMF urges action to deliver on G20’s Commitments
At the conclusion of the Group of 20 (G20) Summit, the International Monetary Fund (IMF) urged the participants to take action to deliver on the commitments made in the summit.
IMF Managing Director Christine Lagarde stated that a first priority was a coordinated effort to raise growth. The G20 agreed that this will require making full use of all policy levers–monetary, fiscal, and structural– individually and collectively.
The G20 also agreed to identify and prioritize reforms that provide the biggest growth impulse for each country, which is an area where the IMF is actively engaged. Pushing back against protectionism and pushing forward with free and fair trade is a vital component of this growth agenda.
A second priority is a commitment that growth must be more widely shared. Again, countries should deploy proven tools to reduce excessive inequality and raise economic prospects, particularly for low-income groups and workers affected by rapid technological change–for example, through skills training and investments in education and health. We need increased growth, but it must be better balanced, more sustainable, and inclusive so as to benefit all people.
And take the geopolitics of the official picture; Merkel and Erdogan stood close to Xi because Turkey hosted the G20 last year, and in 2017 it’s Germany; perfect symmetry for Putin and Obama; perfect symmetry for two other BRICS members, India’s Modi and Brazil’s Temer the Usurper – at the extremities, but still first row; Japan’s Shinzo Abe in the second row – as well as Italy’s Renzi and Britain’s Theresa “we’re open for business” May. And why Hangzhou, for that matter? This being China, it all starts with a historical analogy. Hangzhou has been described as “the Homestead of Silk” even before the development of the ancient Silk Road. Now connect it to Xi’s immensely ambitious New Silk Roads – or One Belt, One Road (OBOR) in their official denomination – which some Chinese analysts revel in describing as “a modern symphony of connectivity.”
OBOR is in fact Xi’s “four prescriptions” in practice; economic growth driven by a frenzy of “inclusive” connectivity, especially among developing nations. The Beijing leadership is totally committed to OBOR as the ultimate geo-economic transformative drive in Asia-Pacific, tying most of Asia to China – and to Europe; and all of this of course totally intertwined with Xi’s turbo-charged reinterpretation of globalization. That’s why I argue that this is the most overreaching project for the young 21st century: the competing “project” by the US is more of the chaotic same. Even before Hangzhou, the G20 Finance Ministers and Central Bank Governors met in Chengdu on July 23-24, to discuss global infrastructure connectivity. The communiqué had to state the obvious; greater interconnectivity is a defining demand of the 21st century global economy and the key to promoting sustainable development and shared prosperity.
This is what OBOR is all about. Chinese consultancy company SWS Research estimated in an OBOR report that the overall investment needed for infrastructure construction is close to an astonishing $3.26 trillion. Showcase projects include the China-Pakistan Economic Corridor (CPEC), defined by Chinese foreign minister Wang Yi as “the first movement of the symphony of the Belt and Road Initiative”. And then there’s the high-speed railway bonanza – including everything from the China-Thailand railway within the Trans-Asia Railway network as well as the Jakarta.
Author is an Assistant Editor of Melange & handling International Affairs of COPAIR.