World’s eyes on Hangzhou Summit
Print Edition
AS Hangzhou, capital of east China’s Zhejiang Province, prepares for the G20 summit, the host country is poised to come up with solutions for a sluggish global economy.
The leaders’ meeting comes as the world pins its hopes on China and other major economies to solve the conundrum facing a world economy plagued by weak growth and rising protectionism.
Despite concerns over its economic slowdown, China is undoubtedly a role model for other economies, and it remains the single largest contributor to world economic growth.
Last month, Stephen Roach, a senior fellow at Yale University’s Jackson Institute of Global Affairs, estimated it could contribute nearly 39 percent of the world’s economic growth this year.
However, the Chinese economy has been under heavy downward pressure, largely due to its shift from reliance on investment and foreign trade toward innovation and consumption.
Policy-makers have not resorted to aggressive stimulus that could work in the short term but create enormous after-effects. The Chinese solution is to stay calm and call for an end to unsustainable growth while pressing ahead with structural reform and encouraging innovation and entrepreneurship.
Restructuring is starting to take effect. Economic freefall has been avoided as new growth engines such as the high-tech sector and consumption take shape.
As most major economies suffer structural problems, structural reform should be a natural recipe for building new paths for growth, and is on the summit agenda.
In Hangzhou, where Internet-based businesses are booming, innovation is also likely to be adopted by the leaders as another engine for more robust growth.
For China, innovation is driving its ambition for “green development.” Recently, China announced a plan to establish a green finance mechanism to facilitate the economy’s transition to sustainable growth, the first country to make such a move.
The summit also comes as a weak global economic recovery is fueling the rise of protectionism in trade and investment in Europe, the United States and in some other developed economies.
China has stressed “strong world trade and investment, as well as inclusive and interconnected development,” which are crucial to spreading economic benefits and shoring up support for free trade.
Since the global financial crisis began in 2008, G20 members have taken a total of nearly 1,600 new trade restriction measures, with just 387 abolished to date.
China sees further opening up as a solution and has translated the idea into action. After setting up its first free trade zone in Shanghai in 2013 and following it with another three in 2014, the government has rolled out plans to set up seven new ones.
On foreign investment, Chinese legislators are considering amendments to four laws which would lay a legal foundation for applying a “negative list” mechanism to all foreign investment.
The Hangzhou summit is expected to create the first multilateral investment framework, an initiative that China and other G20 members put on the agenda.
With the theme “Toward an Innovative, Invigorated, Interconnected and Inclusive World Economy,” the summit is set to drive the global economic agenda.
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