Against the current global economic situation, hosting the upcoming G20 Hangzhou Summit presents an important opportunity for China to showcase its role as a major power to the world. However, China must overcome some big challenges to ensure a successful summit.
The overall international economic situation today is closely related to the drastic change in connotation of the phrase “free trade.” Once the core of soft power of the West, especially the U.S., it has now become a dirty word. The latest round of globalization, which was launched in the 1980s first by countries like Britain and the U.S., promoted world economic development through trade and investment liberalization. At that time, China also began its reform and opening up. Thus it has not only participated in the globalization, but been a major driver of it. Without the active participation of China and its 1.3 billion people, globalization is hardly global. Of course, China itself has reaped tremendous economic benefits from this round of globalization.
However, having profoundly changed the world economic structure, globalization has brought many problems affecting the world economy and various individual nations. At an international level, policy coordination among countries fell far behind the pace of globalization, which resulted in two crises, the 1997-98 Asian financial crisis and the 2008 global financial crisis. And it was in response to these two major crises that the G20 was born and developed.
Globalization and technological advances have led to a widening income gap and growing social inequality in many countries around the world. The very small group of rich becomes richer, while the middle class shrinks. Today, financial and Internet economies are on the rise in many countries. The integration of finance and the Internet has given even more power to capital. In the history of humanity, never has the concept of capital been as important as today.
Western Turn Against Free Trade
For a long time since 1980s, many countries had advocated free trade, which had been the most appealing soft power of the West. However, just mentioning the concept today can attract blame. A number of problems, seemingly caused by globalization, have actually resulted from the failure of various countries in having their domestic reforms and internal mechanisms keep pace with the changing external environment. However, such problems now have become the root of these countries’ political problems and advocacy of trade protectionism. The world today is undergoing major geopolitical changes. From the delicate situation in the Middle East to the European refugee crisis, North Korean nuclear crisis and the South China Sea issue, unstable geopolitical situations are on the rise and bring many uncertainties.
In these circumstances, what stances and policies should China take as the host of the upcoming G20 Summit? Actually, China itself is confronting dire challenges in the international economic situation. First, China is facing a less-than-appealing external environment. EU refused to grant China market economy status. Rather than looking at China, many real problems within the EU should be attributed to the fact that many European countries are more inclined to adopt trade protectionism. Second, China is also facing a severe geopolitical environment. Some countries have been piling pressure on China from surrounding areas, by using the issues such as North Korean nuclear weapons, East China Sea and South China Sea.
First and foremost, China must escape geopolitical traps. The return of complicated geopolitics has caused the greatest uncertainty for the development of world economy. Geopolitics and security have become top concerns for the international community. As the second largest economy in the world, China is responsible for optimally utilizing the upcoming G20 Summit to eliminate the negative impacts of geopolitics on world economic development and inspiring a shift of focus from geopolitics to trade cooperation and development.
Developed countries, big and small, are generally all open. China should further carry out reform and opening up to solve problems brought by globalization. More open approaches should be adopted to address issues while avoiding conflict and even war.
China should vigorously support the globalization process. China has been and will continue to be the most important impetus for globalization. Up to this point, the West has played the most central role in promoting globalization. But when the West’s economy encountered major difficulties, it turned to trade protectionism. China has already become the world’s largest trader. As China is becoming increasingly open, globalization aligns with its national interests.
China maintains and improves the world’s current free trade system. Through internal reform and integration with international free trade mechanisms, China now plays an important role in the existing system. Free trade can also serve China’s soft power.
In turn, China needs to understand and accept new rules. Although the U.S. has been trying to enact trade rules such as in the Trans-Pacific Partnership Agreement and Transatlantic Trade and Investment Partnership, which don’t necessarily work in favor of but against China, China should keep an understanding and open attitude. In a sense, trade rules are universal. Though such trade rules don’t help but may hurt China’s current interests, they could actually enhance China’s future interests in the long term. The driving force for reform can happen because of necessary transformation comply with new rules, like China experienced when joining the WTO.
Most importantly, China has a lot of work to do. In the near future, China’s economic aggregate will surpass that of the U.S. As the country constructs a consumer society, the Chinese market will become increasingly important for the West and the international community at large. Also, China is able to devise new rules or change the old ones based on the existing international trade system. To China, the enlarged economic aggregate not only provides opportunities for it to contribute new rules, but also helps enhance China’s ability to enforce them.
As an important international economic cooperation forum, the G20’s mission is not only coordination of financial and economic policies between members, but also the promotion of sustainable international economic development and the realization of fair development. Today, G20 faces unprecedented challenges in all of these fields. If the Hangzhou Summit can bring consensus on promoting international free trade and globalization, which would benefit both China and the world, it will go down in history as a significant landmark event.