Prospects for the BRICS and G20 Summits through China’s Contribution (3)

In the immediate response to the 2008 global financial crisis, China joined its G20 partners in providing the massive discretionary fiscal stimulus that together arrested and reversed the plunge in the global economy in record time. Through central bank governor Zhou Xiaochuan China suggested a major increase in the allocation of special drawing rights at the International Monetary Fund (IMF), which was thus a key component of the success of the G20’s second summit, held in London on April 1-2, 2009. China subsequently provided its fair share of the overall $1.1 trillion new package of financial support to restore global growth. It made this investment for the greater global good before it received its reward in the form of the enhanced voice and vote at the IMF that it and its rapidly growing BRICS partners sought. Most recently, China, with its world leading foreign exchange reserves, has provided substantial support to the new firewall fund that the IMF has created to help the embattled Europeans cope with the lack of confidence caused by their distressed debt. Through many leadership roles, China has effectively induced the members of the G20 to reform the voice and vote at the IMF to give all rising powers the greater place that they now deserve.

For the forthcoming St. Petersburg Summit in September, China and its G20 partners face formidable challenges. They range from overcoming fiscal drag from political paralysis in the United States through the continuing debt problems in recession-ridden Europe, to even larger ones in a long stagnant Japan. These challenges are compounded by the recent sharp economic growth slow downs in Brazil and India. In this context China’s recent return to robust growth makes it the leading locomotive to pull the global economy as a whole toward strong, sustainable and balanced growth. It also enables China to contribute effectively to most of the standard items on the G20 summit agenda that the Russians have continued at St. Petersburg: the Framework for Strong, Sustainable and Balanced Growth; jobs and employment; international financial architectural reform; strengthening financial regulation; energy sustainability; development for all; enhancing multilateral trade; and fighting corruption.

China’s opportunities for leadership are even greater in regard to the new two priorities that the Russian host has added: financing for investment as well as government borrowing and public debt sustainability. In regard to the first, finding new sources of finance for investment, China’s skill in giving birth to a new BRICS development bank at the BRICS Durban Summit will be a big down payment in making Vladimir Putin’s and the broader G20’s St. Petersburg Summit a success.

Conclusion

To fully seize such opportunities for global leadership through BRICS and G20 summitry, China will need more than merely mobilizing its formidable material power and the skill and experience in G20 diplomacy it has acquired from the past. It will also need to enrich at home and abroad all three growth-generating components that the Russians have wisely identified as the St. Petersburg Summit’s theme: quality jobs and investment, effective regulation, and trust and transparency. In doing so it will do much to assist and assist its still formidable partners in the United States and Europe that is standing by their side in addressing the great challenges that they face at home and in the now intensely interconnected world as a whole.

Biographical Note:

Professor John Kirton is the co-founder and co-director of the BRICS Research Group and the founder and co-director of the G20 Research Group at the University of Toronto in Canada. He is the author of G20 Governance for a Globalized World, recently published by Ashgate and available at http://www.ashgate.com/isbn/9781409428299.