Summit spotlights host's greater leadership role

Nation's growing consumption will benefit world, US economist says

China is expected to play a greater leadership role in promoting global growth and development as it hosts the G20 Leaders Summit on Sunday and Monday, according to an economist at a world's top think tank.

"China chairing the G20 Leaders Summit in Hangzhou is an important signal of changes in the world economy, with emerging markets led by China playing a more and more important role," said David Dollar, a senior fellow at the John L. Thornton China Center of the Brookings Institution.

China's economy has grown exponentially in the past couple of decades. Its GDP accounted for only 2 percent of the global total in 1995 but by 2015, the percentage had exceeded 17 percent. International Monetary Fund data indicate that China has contributed some 35 percent of global growth in the past five years, and that figure is expected to stay at around 30 percent until 2020 despite a relative economic slowdown.

Dollar, a US Treasury economic and financial emissary to China from 2009 to 2013, said China played an important role in the wake of the global financial crisis. "It stimulated investment, which helped its own economy as well as providing spillover benefits to others," he said.

He believes while China is facing overcapacity and a slowdown in investment, it needs to stimulate consumption through structural reforms and fiscal measures. Otherwise, the excess capacity could become a drag on the world economy.

China is switching from an economy driven by investment and exports to one that is based on innovation and consumption. Addressing the excess capacity has been a major task outlined by the government.

Retail sales grow

Consumption is on the rise. China's retail sales grew by 10 percent in 2015 over the previous year to 26 trillion yuan ($3.9 trillion), much faster than overall economic growth. Consumption is expected to account for 60 percent of the GDP in 2016, according to a report by the China Council for the Promotion of International Trade.

Dollar said he is looking not for any big, specific measures from the G20 Summit in Hangzhou because there have not been any breakthrough developments at G20 summits in recent years.

"The question rather is whether China and other emerging markets can play a leadership role by opening up their economies more and following through on structural reforms that would make their growth more balanced and sustainable," he said.

He believes the world economy needs more fiscal stimulus and the two countries best placed to deliver are China and Germany. "Each has a large trade surplus and fiscal stimulus would make their growth more balanced and sustainable," he said.

In Dollar's view, Germany has room to push infrastructure spending whereas in China the challenge is to stimulate more consumption, both household consumption and government spending on education and health.

Dollar, who also is a former World Bank country director for China, has been a supporter of reform in the governance of international financial institutions to reflect a changing world, long before the US Congress finally approved the 2010 IMF reform measures in December to allow a bigger say for emerging economies.

"I expect China to continue to be a positive voice pushing for reform to the governance of the IMF and other institutions so that they better reflect today's reality," he said.

"I hope China can become a leader in opening up its economy and being a source of demand for others."

chenweihua@chinadailyusa.com

(China Daily 09/04/2016 page25)