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Leaders of the world's top 20 industrialized and emerging economies attempt to ease fears about the global economy
G20 LEADERS: Leaders of the Group of 20 economies at the Cannes summit on November 3 (CFP)
Three years after the outbreak of the global financial crisis in 2008, problems such as the European sovereign debt crisis have remained the sword hanging over the international economic system's head.
Leaders of the Group of 20 (G20) economies discussed these pressing issues at their sixth summit in Cannes, France, from November 3 to 4, agreeing to join hands to pass through the current crisis. China also promised to make greater contributions to the world economy while maintaining its own growth.
Summit achievements
After discussions, G20 leaders issued a communiqué on boosting economic recovery, promoting reform in international monetary and financial systems and improving global economic governance.
The summit also adopted the Cannes Action Plan for Growth and Jobs. The plan identified each country's policies and actions to promote economic growth, including short-term measures aimed at ensuring growth and promoting stability, as well as mid- and long-term plans for carrying out structural reforms, expanding employment, and consolidating the basis of economic growth. This shows the determination of the G20 to jointly promote the strong, sustainable and balanced growth of the world economy.
At the summit, leaders promised to push forward free trade and oppose trade protectionism. The Financial Stability Board announced the list of 29 "global systemically important financial institutions," including the Bank of America, the Bank of China and Deutsche Bank.
Based on an agreement reached at a meeting of G20 finance ministers and central bank governors in October, these institutions will be required to increase their capital ratio to prevent a banking crisis.
Ma Zhaoxu, spokesman of the Chinese delegation, listed four major achievements of the Cannes summit: First, the summit focused discussions on the European sovereign debt problems. G20 leaders decided to ensure the IMF has sufficient resources to help member countries overcome their difficulties, and specific measures are to be worked out by G20 finance ministers.
Second, the summit stressed the global economy has entered a difficult period, so the G20 needs to further strengthen macroeconomic policy coordination, jointly support economic recovery and restore market confidence.
Third, the summit discussed other issues including the reform of international monetary and financial systems, volatility of commodity prices and international trade and reached an important consensus.
Fourth, emerging market countries actively participated in discussions and consultations at the summit, and played an important and constructive role.
Europe's self-salvation
The Cannes communiqué welcomed the EU's measures and ideas to deal with sovereign debt issues. These include restoring debt sustainability in Greece, strengthening European banks and building firewalls to avoid contagion. Most countries believed European debt problems can be solved by Europe's own efforts.
"What has happened since the outbreak of the international financial crisis in 2008 shows that we are facing not just an economic and financial crisis. It is a crisis that has exposed certain deficiencies in the existing institutions and mechanisms, policies and approaches, and ways of development," said Chinese President Hu Jintao in his speech.
U.S., European and Japanese economies now are all trapped in structural problems, and their mode of development is being challenged, said Qu Xing, President of the China Institute of International Studies.
Since the international economic situation is facing new challenges, all countries should make more efforts to improve their models of economic and social development, he said.
The world cannot expect China to play a substantial leadership role in the G20 or be the silver bullet to shoot the ongoing European crisis, said Wang Yong, Director of the Center for International Political Economy at Peking University, in an article published on the East Asia Forum website.
"In the eyes of Chinese leaders and the public, China is not ready to take on such a role," he said. "The country is limited in its strength and knowledge, and by its status as a developing nation."
China's economy is experiencing high-speed growth, but it still faces internal social problems and difficulties with efficiency and fair distribution.
China believes the global economy is fundamentally unbalanced, as evidenced by the "disproportionate and unchecked" role of the U.S. dollar as the main reserve currency and the deterioration of the European sovereign debt crisis, Wang said. It also views reforms aimed at strengthening the international monetary system and the internal reform efforts of the EU as imperative to establishing conditions for stable, strong and balanced growth.
And as for China itself, it must work hard to change from an export-driven economic development model to one based on domestic demand, Wang said.
Zhang Liqing, Dean of the School of Finance at the Central University of Finance and Economics in Beijing, pointed out that since China and Europe have established a close economic relationship, Europe's economic turbulence also poses a threat to China's economy. He suggested China should offer European nations support within the reach of its capability.
"After all, China is still a developing country," he said. "During the past decades of economic development, we have piled up huge foreign exchange reserves. But this doesn't mean we have too much extra money just because we are not able to fully use our foreign exchange reserves given defects in China's current economic development model."
Zhang Liqing said China could help Europe by injecting rescue capital to the IMF or participating in a joint rescue plan with other economies.
Ma Zhengang, former Chinese Ambassador to Britain, said Europe should be confident about overcoming current difficulties. But developed nations should put their egos aside, and sincerely feel that they are in the same boat with developing economies instead of trying to transfer their crisis to them, he added
China's contributions
Although current problems of the world economy are most evident in developed nations like Europe and the United States, no economy can be completely immune to the spreading crisis.
"Maintaining stable and fairly rapid development is China's biggest contribution to the world," said Zhang Yuyan, Director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences.
In his speech, President Hu said the G20 must continue to demonstrate the spirit of "standing together in times of adversity and pursuing win-win cooperation."
He declared that China will give zero-tariff treatment to 97 percent of the tariff items of exports to China from the least developed countries having diplomatic ties with China as part of its commitment to South-South cooperation. This shows China takes its responsibilities seriously, said Zhang Yuyan.
Since China's accession to the WTO a decade ago, China's economy has made significant advances and its contribution to world economic growth has been growing, Hu said.
At the same time, China's average tariff level has dropped from 15.3 percent to 9.8 percent, which is lower than the WTO requirement for developing countries. Its total imports in the past decade have reached $8.5 trillion, creating a huge market for other countries.
In the first three quarters of 2011, China's GDP grew by 9.4 percent year on year. Its imports grew faster than exports, and China's trade surplus decreased over the same period last year.
Hu also stated China's plans for economic development: strengthening and improving macro control; maintaining a balance between achieving steady and fast economic growth, adjusting the economic structure and managing inflation expectations; achieving all-round, balanced and sustainable development; deepening reform and opening up; and improving people's well-being.
In the coming five years, China's imports are expected to exceed $8 trillion, which will be a major contribution of China to the global economy, Hu said.
Li Daokui, a professor of economics with Tsinghua University, said China's economic development has created opportunities for its trade partners as well as foreign investors. China has invested a large amount of capital in international financial institutions like the IMF, provided assistance to other developing countries and purchased national bonds of developed countries—moves that have helped stabilize the international economic and financial situation.
Perspectives on Stronger Growth
Chinese President Hu Jintao made a five-point proposal on promoting global economic growth and financial stability in his speech on November 3 at the G20 Summit in Cannes. Excerpts follow:
- Ensuring growth while paying attention to balance. We should introduce new and strong measures to ensure that the fiscal and monetary policies are fully implemented and that funding is channeled into the real economy to boost production and employment. We should make major efforts to support the development of small and medium-sized enterprises and help them speedily overcome current difficulties.
- Pursuing win-win outcomes through cooperation. We should strengthen consultation and coordination, introduce mutually supporting and complementing policy measures, and tackle sovereign debt risks, massive unregulated cross-border flow of capital and other financial risks. We should keep the fluctuation of commodity prices under control, mitigate global inflationary pressure and make sure that the economic policies pursued by various countries do not offset each other.
- Improving governance in the course of reform. We should advance the reform of the international monetary system in a steady manner, expand the use of the special drawing rights (SDRs) of the IMF and reform the SDR currency basket. We should be firmly committed to free trade, oppose trade and investment protectionism and move forward the Doha Round negotiations.
- Striving for progress through innovation. We should bring into full play the basic role of the market in resources allocation while avoiding blind pursuit of profit and malicious competition. We should vigorously pursue scientific innovation and upgrade industrial technologies. At the same time, we should continue to make creating jobs and improving people's life our top priority.
- Promoting common prosperity through development. We should further unleash the development potential of emerging markets and developing countries and boost the economic growth of developing countries in order to stimulate aggregate global demand. We should continue to increase the voice of emerging markets and developing countries in global economic governance and create an enabling institutional environment for their development.
(Source: China's Ministry of Foreign Affairs)
