Yu Yongding and Domenic Lombardi write: The world caught a break in 2009. The G-20, an assembly of the world’s largest developed and major emerging economieswas meeting in Pittsburgh to formulate a response to the global financial crisis. US President Barack Obama, having gotten the message that the G-7 could no longer oversee the global economy on its own, led a summit that made the G-20 the primary body for coordinating global economic policy. It was a highpoint for American leadership.
Next year, the world’s other economic superpower will assume the presidency of the G-20 and host its annual summit. President Xi Jinping will undoubtedly make an impression of his own.
Elements of the current G-20 agenda align well with China’s domestic economic concerns, especially with regard to infrastructure. Last year, G-20 members agreed to pursue a global infrastructure initiative aimed at facilitating investment and boosting financing for infrastructure projects and, crucially, for small and medium-size enterprises.
Given that SMEs will play a key role in China’s new growth strategy, and already account for some 85% of new jobs in the country, this initiative suits China well. With Turkey having zeroed in on SMEs as a key vehicle for fostering more inclusive growth, this year’s summit could already produce progress on this front.
China has long sought to place Asia on par with North America and Western Europe in terms of connectivity. . If China uses its G-20 leadership to push vigorously for change, it would not only improve its own chances of gaining more authority in the IMF; it would also gain favor with other emerging economies, which have been similarly frustrated by US (and European) leaders’ treatment of the issue.
China might be able to assume a leadership role the global financial system. China, where the US dollar’s predominant role is often criticized for having subjected global finance to unnecessary volatility, could use its G-20 presidency to gain a position the world’s only international currency: the IMF’s Special Drawing Rights.
In this effort, it would be in China’s interest to add the renminbi to the basket of currencies that determine the SDR’s value. At the same time, China might pursue a shift in the dynamic of international financial regulation. The G-7 economies have rarely hesitated to name and shame emerging economies for their failure to comply with global norms.
Though China’s domestic regulatory regime remains subject to severe constraints,
China may not be able to achieve all of its goals next year. But, if it plays its cards right, it could do much to increase its international influence, while enhancing global economic and financial stability.
