The 2011 G-20 Summit: An Opportunity for Asia?
November 2, 2011
Cannes, a medieval city on the French Riviera internationally renowned for its luxurious hotels, seafront “promenade,” and International Film Festival, is used to welcoming the rich and famous.
It is, however, another type of festival that will take place in Cannes this week. The city is gearing up for the sixth annual Group of Twenty (G-20) Summit where heads of state, finance ministers, and Central Bank governors from 20 industrialized and developing economies (19 countries plus the European Union) will converge to discuss financial markets and the world economy.
The G-20, whose member countries account for over 80 percent of the global output and two-thirds of the world’s population, is the premier forum for industrialized and developing countries to discuss key issues in the global economy and monitor international economic cooperation. Represented by the high-income countries of Japan and Korea, but also by the middle-income emerging economies of India, China, and Indonesia, Asia has the potential to play a more influential, powerful role in this G-20 than ever before.
Asia has always been high on the agenda of the G-20, which was created in 1999 in the wake of the 1997 Asian financial crisis to respond to a growing recognition that key emerging-market countries were not adequately included in the core of global economic discussion and governance. But recently, the role of Asia, and more particularly of its most powerful representative, China, may have shifted from “the region to assist” to “the region that comes to the rescue.”
In the turmoil surrounding global economic, financial, and monetary uncertainty, expectations are high that the G-20 will propose concrete actions to stimulate economic growth and restore trust in the international financial system. Amid the frantic attempts by individual countries, especially developed ones, to contain the biggest economic and financial crisis since the Great Depression, the forecasted GDP growth of China (9.5 percent), India (7.8), Indonesia (6.4), and even Korea (4.5) make Asia look like an island of positive growth rates that many envy.
So, what is at stake for a growing Asia and what can it expect to gain from this summit?
First, Asian leaders and business communities expect to be reassured that they will continue to benefit from global trade and that developed countries will keep their markets open. The emergence of Asian economies as key players on the international scene has been triggered by the progressive dismantling of barriers against international trade and investment. The temptation that developed countries may have to solve their growth and employment crises by adopting protectionist measures that favor the consumption of local products, keep production onshore, and maintain investments within their borders, is a major threat for Asia and other developing countries.
Second, Asian members will expect the G-20 to come to a consensus regarding measures to stabilize the global financial market, to reform the international monetary system, and to better control the volatility of commodity prices.
In these areas, China will clearly emerge as a pivotal player in this week’s summit.
The current debt crisis of developed countries has highlighted the imbalance between the overspending economies of the West and the capacity of a country like China to use its enormous financial capacity to fuel developed countries’ economies. China’s position as a major economic and financial partner for the most developed countries has been reinforced by its recent massive investments in countries like Greece, and by its expressed interest and capacity to help the eurozone recover from its crisis. Earlier this week, speculation arose that China was weighing the options of investing in the European Financial Stability Facility (EFSF), described as the “eurozone’s bailout fund.” Such a move would surely mark a turning point in E.U.-China relations.
Asian members will also expect the G-20 to restore the capacity of international financial institutions such as the International Monetary Fund (IMF) and the World Bank to revive investments into Asia’s developing economies. Asian countries will be keen to make sure that the IMF is capitalized enough to continue to support medium-sized economies in Asia. It is to be expected that the new role of rising Asian contributors like China and Korea in recapitalizing such global financial institutions would be accompanied by a request for a greater say in the running of these institutions.
Lastly, leading Asian economies like China will expect to gain more political influence and recognition from this G-20 summit. In the context of an unstable global economy and low growth rates, the rising Asian powerhouses will try to assert more leverage. Indeed, this political aspect may be the most delicate to deal with for western countries.
Today’s key economic challenges require a collective and ambitious action that only the G-20 has the capacity to unleash. There is no doubt the discussions will be intense and that a consensus over such critical issues will be very difficult to reach. But it is clear that despite such challenges, the stakes have never been higher for Asia and for the rest of the world to work together.
Véronique Salze-Lozac’h is The Asia Foundation’s director for Economic Development Programs. She can be reached at [email protected]. The views and opinions expressed here are those of the individual author and not those of The Asia Foundation.
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