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UPDATED: September 2, 2013 NO. 36, SEPTEMBER 5, 2013
G20 Summit Prospects (CHINESE VERSION)
A world economy facing long-term and sluggish growth causes concern
By Zhang Maorong
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It is reasonable to expect the summit to make some progress in employment, financial supervision, international financial reform and common development. The summit will make some achievements in creating green and sustainable job opportunities, enlarging input on training projects toward young people, improving education and training quality, and perfecting social security systems.

The Financial Stability Board (FSB) under the G20 framework has been playing a more and more important role in the international financial supervision field. It is expected that the FSB might become mechanized during the coming summit. Europe and the United States have been strengthening supervision on financial creation. They also will realize regulatory compatibility through negotiations on the U.S.-European free trade area. The two sides might reach a consensus on supervision over shadow banking as well.

The coming summit will include discussions on development topics, including food safety, labor resource development, financial inclusion and infrastructural facility investment. Russia appeals for financial inclusion construction, focusing on women, immigrants and young people's access to financial services.

The summit will hopefully make big progress in the food safety field, such as establishing a tropical agriculture platform, and launching initiatives on wheat research and global agricultural supervision.

Although the IMF's reform on quota and a voting shares plan had been passed on previous G20 references with emerging economies like China and India gaining improved shares, the implementation of such plans has been very slow. For example, the United States hasn't finished its domestic legislation process of the IMF's 14th share reform. The G20 Summit will initiate support on the IMF's structural reform, and then push the IMF to finish its 15th share checking by January 2014.

There will be little progress on other subjects like energy sustainability, anti-corruption and promotion of multilateral trade. Russia, an energy giant and the host of the coming summit, hopes it will draw attention to energy problems. In spite of the clear direction of developing sustainable and green energy, other member states will show limited interest on the complicated energy problem, because the shale gas revolution of the United States has eased tensions on global energy supply to some degree.

Russia suggested setting up an independent anti-corruption institute under the G20 framework. The suggestion sounds rational, as governments have reached a consensus on anti-money laundering and anti-transnational bribery during the past year. But there will be big obstacles when implementing the consensus due to different national conditions.

As usual, the summit will discuss anti-trade protection, which mostly benefits developed countries and hurts developing ones. Western developed countries are trying to establish regional free trade areas, like Trans-Pacific Partnership, according to their interests and pressure the development of emerging markets, including China. Developing countries are facing a threat of being marginalized in world trade. This year's summit might express concerns on the fragmentized trade pattern and functions of the WTO. But it is hard to predict whether there will be a common understanding.

Permanent global focus

After years of continuous adjustment after 2008, developed countries, especially the United States, have made progress on structural reform. Their financial markets have become stable, technology innovation and industry upgrading fastened, with economy basically on track of stable recovery. Once more, they are a major engine of world economic growth, as they have created 60 percent of its current development. However, mounting financial deficits, a high unemployment rate and public debt remain the time-bombs of developed economies.

Developing countries are facing a worsening situation. As the United States stopped quantitative easing, they will come under pressure from capital flight, currency depreciation, unstable financial markets and even social crises in a short time. Developing countries are in shortage of economic growth momentum because they have put too much attention on high-speed growth, but too little on structural reform in past years. Current economic recovery of developed countries is mainly due to the processing industry and export growth, but not to import demand increase of developing countries' products. Therefore, developing countries might be at risk of an economic slide. Big emerging economies, like India, Brazil, Russia and South Africa, have seen sharp declines, unstable financial markets, sluggish economic growth, but big structural reform pressures. Smaller emerging economies like the Philippines will still be at a stage of rapid economic growth.

It is worth mentioning that China still has a bright future of development. According to economic statistics released in July, the Chinese economy has shown a trend of stabilization. And big international investment banks resumed their regulation of China's economic growth expectations, showing great confidence in the Chinese economy. China's status as the world economic growth engine has cemented, and its contribution to world economy will enhance.

The world economy will enter a long phase of low- or medium-speed growth in the post-crisis era. And as a major global economic governance platform, the G20 still has a long way to go.

The author is an associate researcher at the Institute of the World Economy Studies, China Institutes of Contemporary International Relations

Email us at: liuyunyun@bjreview.com

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