Although it has been nearly a decade since the onset of the global financial crisis, a lack of confidence and general uncertainty is still sweeping across the world economy. The recovery of world growth has been sluggish at best. World demand remains depressed. Trade growth has been stagnating as protectionism has increased. Tighter financial conditions persist, and coupled with lackluster capital flows, M&A activity has declined. Emerging markets are performing below their potential, and a low and volatile commodity price environment in particular has seen most notably African resource-exporting economies weaken. 

Add to this the recent shock and the possible repercussions of Brexit, and the upcoming presidential elections in the United States, continued downside risks to global growth persist. The World Bank now predicts that the global economy will only expand by 2.4 percent this year. In a recent report published by the bank in June 2016, it noted that “another stretch of muted growth” lies ahead. 

Ahead of the pack 

China remains the country that continues to substantially outperform the global growth outlook. However, China's own economic metamorphosis from an export-led to a consumption-driven and more sustainable growth model has put the brakes on its three decade-long break-neck speed performance, "only" recording a 6.7-percent GDP growth rate in the first half of 2016. 

The Asian giant – the world's second largest economy – has become the key driver of global economic activity and demand growth. In comparison, the other two important pillars of the world economy – the United States and the European Union – have over the same period recorded about one-fifth and one quarter of this growth rate respectively. This trend has been visible for some time. 

It comes as no surprise that China is increasingly expected to assume a leadership role in the global economy, given the current economic quagmire in many other important centers of economic gravity. 

China's hosting of the G20 presidency this year is thus well-timed. The stage has been set for China to showcase its global leadership and thinking on addressing what are already pressing challenges facing the world economy. Under the theme Toward an Innovative, Invigorated, Interconnected and Inclusive World Economy, Hangzhou City is ready to host the G20 Summit on September 4-5, 2016. 

Key outcomes 

A list of 10 key outcomes that were tabulated by China's Foreign Minister Wang Yi earlier this year and that are expected to be achieved at the summit captures China's thinking on these issues. Seven of these include (as per the G20 website): 

- Developing a blueprint for a new and innovative growth path for the global economy;

- Formulating action plans to implement the Sustainable Development Goals of the UN by 2030;

- Drafting strategies for global trade growth by reducing trade costs and increasing trade financing, as well as enhanced trade and investment policy coordination between countries;

- Setting guiding principles for global investment policies through creating the first multilateral global investment rules framework;Deepening the reform of Bretton Woods institutions and the international financial architecture;

- Launching a cooperation initiative to support Africa and least developed countries' industrialization through investment, infrastructure and capacity building collaboration;

- Drawing up entrepreneurship action plans. 

While some of the outcomes, such as the promotion of and boosting international trade (given the current global backlash against globalization) and cross-border investment, could be seen by some as being aligned to China's own self-interest, a longer-term sustainable growth outlook for China will have important spillovers for world commerce and global demand. 

It is thus crucial that China and its peers in this grouping become increasingly aware of the importance of working together, rather than against one another, in order to boost confidence and global economic activity. Pledges at recent finance minister and central bank governor meetings already support investment in infrastructure, a more enabling environment for trade growth, continued commitments to structural reforms and pro-growth policies. 

A greater and clearer focus on pro-growth fiscal and structural policies of some of the G20 member countries to stimulate regional and global demand in the major centers of global commerce will have multipliers for the world economy. 

Impact on Africa 

Proposed policies to be implemented through the G20 Summit outcomes will also have impacts on African economies through trade, investment and other financing channels. African economies have China and certain G20 members, including the United States, the United Kingdom and Africa's now again largest economy in U.S.-dollar terms, South Africa, as important trading and investment partners. 

Already, some of the proposed points of discussion have also been key agenda items in African-hosted forums, such as the World Economic Forum on Africa, hosted in Kigali in May 2016, and thus are building on key issues of concerns facing a number of sub-Saharan African economies. 

One of these is commodity price shocks over the past two years having re-emphasized the importance of economic diversification into value added products and service exports both for sustaining employment levels, as well as export earnings, during commodity cycle downswings. 

Another example is that of embracing and investing in innovation in the business and development models of countries. This in itself is a key shift for the majority of African economies. In line with the UN Sustainable Development Goals, these new growth models could provide better opportunities for inclusive growth in African economies, rather than resource-driven growth paths, and speak directly to some of the proposed action points of the G20 Summit. 

What is encouraging is China's included focus on Africa (and least developed economies) in the proposed outcomes of the G20 Summit. By increasing opportunities for the continent – which has been negatively affected through lower oil and other commodity prices – through promoting trade and investment, as well as reforming the global financial architecture, China seems to champion commercial benefits and diversification prospects for African economies. 

For Africa this builds on China's foreign commercial policy objectives and means greater prospects for attracting investment into infrastructure (through the Asian Infrastructure Investment Bank and the BRICS Bank) as well as agribusiness, manufacturing and other value-adding sectors (through China's need to diversify forex reserves and industry offshoring given a domestic rising cost environment). 

It also provides the potential for African economies to deepen their integration into regional and global value chains as various trans-national free trade agreements are lobbied for approval, as industries emerge in Africa to service the growing demand of the Chinese consumer, and as greater quantities of the renminbi currency become available to finance trade activity in this corridor. 

Although the G20 Summit in Hangzhou itself will not be the saving grace of the growth fortunes of the world nor of African economies, the agreement by leaders of some of the largest and most important economic players to commit to change is in itself a confidence booster. 

The author is Associate Director at Deloitte

Copyedited by Francisco Little

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