The G20 summit in Pittsburgh, the third of its kind, has been highly anticipated for the active role it could play in bringing a stable and lasting momentum to the emerging global economic recovery.
The two previous rounds, in Washington and London in November last year and April respectively, contributed much to the efforts to prevent the collapse of the international financial structure and the world economy from a full-blown recession.
Currently, the world economy has turned for the better and some major economies have witnessed signs of rejuvenation in different degrees. In this context, Germany and France, two major economies in Europe both enjoying positive growth in the second quarter, claimed it is time for the Pittsburgh summit to consider the withdrawal of large-scale economic stimulus plans to avoid inflation and an increase of financial burden on countries. The conclusion runs counter to the message delivered at the meeting early this month of G20 finance ministers and chiefs of central banks. At the gathering, most participants believed it is too early to conclude that the crisis is over, and that the world economy still faces numerous uncertain factors. To consolidate the nascent recovery, they suggested that countries should adopt a cautious approach when considering stopping of stimulus plans.
China stands by this viewpoint, and a series of stimulus measures it has put in place has achieved notable effect in spurring the growth of its export-dependent economy. However, the recovery lacks a strong foundation to bolster the country's foreign trade landscape while its moves to transform the domestic economic development model as well as employment have met with less success. To carry forward the momentum of initial economic recovery, China should continue its macroeconomic policies of proven efficacy and stick to the pro-active financial and moderately loose monetary policies.
According to the timetable drafted by the London summit, the redistribution of representative power among country-members in international financial institutions remains urgent and should be moved forward in substantive ways. BRIC (Brazil, Russia, India and China) countries pointed out that the unfair distribution of shares and voting power in the International Monetary Fund (IMF) and the World Bank (WB) has affected their legitimacy and hence their reforms should focus on shifting some shares to developing nations and emerging economies. At the London summit, China decided to purchase some $50 billion IMF bonds, laying a solid foundation for playing a more important role in the body.
China's participation in the international crisis rescue, as indicated by its posture at the two previous G20 summits, has won unanimous praise from the international community. It is China's earnest hope that all parties concerned will extend unreserved cooperation at the Pittsburgh summit and forgo their selfish national interests to translate consensuses on paper into substantial action and promote a lasting recovery of the world economy. The country insists that countries' voting power in IMF and WB be evenly distributed between the developed and developing countries for the equality of status between the North and the South. Currently, developed countries enjoy a 57 percent and 56 percent voting power respectively in IMF and WB. That means that a 7 percent and 6 percent share should be respectively shifted to developing countries if they are to exercise equal voting power. This is also BRIC's aim in their push for reform of the two institutions. Due to their ever-growing and irreplaceable role as representatives of emerging economies and developing nations in tackling the global financial crisis, the international community also expects a bigger role from BRIC in the world's main economic bodies. Robert Zoellick, WB President, extended his support to reforms of the two bodies in this direction. During his tour of Beijing in early September, Zoellick said he had made unremitting efforts to raise the share of developing countries in WB from 44 percent to 50 percent.
Under these circumstances, reform of international financial institutions are expected to not only dominate the Pittsburgh summit, but also serve as an important topic at the annual WB and IMF meeting due in October.
Owing to effective mutual coordination in the two previous rounds of G20 summit, the international society has achieved initial effects in containing the global financial crisis and a large number of countries have realized economic recovery to a certain degree. To consolidate the hard-won achievement, how to ensure an open market and prevent protectionism appears particularly important. From the beginning, the G20 summit has sent an explicit message that it is opposed to trade protectionism. However, the US' imposition of a three-year punitive duty on the import of China's tires on the eve of the Pittsburgh summit and shortly after the launch of the Doha Round Talks has transmitted a negative message that the world's largest economy turns to protectionism. Earlier in Feb, the US administration signed the Congress-drafted "Buy America" clause. It is also prepared to impose on imported products the carbon tariff.
It is known that ending the Doha Round negotiations sooner will not only help push the world economic recovery, but also help curb the re- emergence of protectionism. But the US refusal to make concessions to developing countries on agricultural products has proved to be the largest stumbling block to the round.
As the host of the Pittsburgh summit, there are high hopes that the US would take practical measures to counter protectionism. Washington should be well aware that any country's economic prosperity is inseparable from openness of the global economy and its lasting growth.
The author is associate research fellow, China Institutes of Contemporary International Relations.