Research Center for International Finance
Policy discussion No. 2015.001
July.1, 2015
A Shared Opportunity: China and G20 in 2016
LI Yuanfang
1. Introduction
The global economic landscape has evolved its way out of the 2008 financial crisis although there is still a long way to move out of its shadow. Collective actions have brought significant confidence to the market during the past global financial crisis. However, as economic conditions vary in different economies, the issues facing national authorities vary extensively, especially in the short term. In lots of policy areas, collective actions in the model of what we have witnessed during the crisis period can be both intellectually immature and politically difficult.
The world economy has been so integrated through trade, financial, and information flowsthat economic and political issues can hardly be isolated without causing spillovers across the borders in one way or another. The need for global policy communication and coordination grows spectacularly. Given the current global economic and political conjuncture, there is still substantial room for the G20 to unleash its potentials in raising global awareness, enhancing meaningful dialogue, and inducing concerted global policy effort on systemic issues confronting the global economy.
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2. Exploring the G20 potentials
The G20: past achievements and the seeming impasse
Most observers would agree that the most significant shift in global economic governance in recent years is the rise of the G20 as the central forum for global economic governance, replacing the role the G7 has previously held. Although the G20 was established immediately after the Asian Financial Crisis, it role was limited to more sectorial issues around economic and financial stability. The Great Financial Crisis has empoweredthe G20. The initial national responses to the 2008 financial crisis was patchy and uncoordinated; despite the cutting of interest rates to record lows by all the major developed economies, massive fiscal stimulus in the US and China, and the first uses of quantitative easing, further coordination was needed. This was especially true in the area of financial stability in the face of potential bank failures. Facing the dire circumstances, the advanced economies also recognized that the emerging economies have risen to such a significant share and so much integrated with their own that any solutions within themselves will be partial. There was also a motivation to seek the backing of ‘surplus’ countries, most notably China, in the global response. The combination of these factors led the G20 to be expanded in 2008 from a forum for central bank governors and finance ministers to a yearly summit including heads of government.
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3. Shared Opportunity for China and the G20
China’s role in the global economy and the G20
China is one of the one of the world’s main economies. In terms of PPP, China’s GDP now accounts for more than 16% of the world total in Purchasing Power Parity Terms, even surpassing the U.S. in 2014. It will rise to nearly 19% in 2020 . In terms of trade, China is the No.1 trading nation in goods, with export accounting for 12.7% of the world’s total trade in 2014 . Chinahas also become the largest or among the largest importer of many globally traded commodities.
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4. Conclusion
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