China can set an example by putting its G20 call for action into practice
Leading the way on structural reform, cutting overcapacity and promoting innovation is the best way for President Xi Jinping to show China’s leading role in global governance
Summits of the Group of 20 major world economies always risk cementing the reputation of the G20 as a talk shop. After China’s first summit, the question is whether world leaders can rise to the challenge thrown down by host President Xi Jinping to become an action team that implements initiatives and sheds that tame label. Xi tried to rally joint policy action on structural reform and innovation. “Facts have told us that the old road of simply relying on fiscal and monetary policy is a dead end,” he said.
Having used the summit to put its stamp on global governance, China now has an opportunity to lead by example, because structural reform and innovation are key to Xi’s domestic strategy for putting China, the main engine of the global economy, on a path to sustainable growth. It remains to be seen if other countries will follow, given that they have hedged their commitment by stipulating that the choice and design of structural reforms are to be consistent with countries’ specific economic conditions.
With rising anti-globalisation sentiment, the world is facing a lot of problems, even if the financial system has stood up well to recent bouts of instability. As Xi rightly said, conventional ways of solving them are becoming less effective. There is a need to come up with new ideas. On past recent form of a lot of talk and not much action, the G20 may seem like an unpromising place to start. Hopefully Xi’s speech, with an open call to action, will make a difference. It is not often a G20 host uses such direct language.
Consensus is a basis for working together, even if the draft communiqué was finalised by officials without direct input by the leaders. But the best way forward if Xi is so serious about action to implement agreed initiatives such as reform and innovation, consultation on exchange rates, industrialisation in Africa and least-developed countries and anti-corruption cooperation, is for China to lead by example. Indeed, in areas like reducing overcapacity and increased transparency of the financial sector, the world will be watching. Reducing overcapacity in China alone would go a long way towards solving that problem globally.
If China can make progress on these fronts as it has done with climate change, working together with the US, it would set a compelling example for other powers like Europe and India, where elected politicians have to reconcile competing interests. While China’s leaders do not face popular elections, they do face domestic pressures from political and vested interests which call for strong leadership if it is to set an example.