New considerations for China’s 2016 G20 Presidency

It is now close to the halfway point in China’s 2016 G20 Presidency, and this issue of the G20 Monitor discusses several additional considerations for China as it pursues a vision of an innovative, invigorated, interconnected, and inclusive world economy. In light of the challenges governments are facing in pursuing growth objectives and structural reforms, and the lack of consensus on how best to stimulate demand, the pressure remains on the Chinese G20 Presidency to lead by example. David Dollar suggests that China can set a positive example by opening up at least some important parts of its economy. Dollar highlights that if such change is linked to the global agenda, it can also help China in articulating its goals of an innovative, invigorated, interconnected, and inclusive world economy. Such domestic reform would inject new dynamism and innovation into sectors that are largely dominated by state enterprises and that are likely to be important growth centres in the new Chinese growth model; and would reaffirm an open trading and investment system at a time of difficult global growth and rising voices of protectionism around the world. Nicolas Veron reviews the achievements and challenges of the G20’s financial regulatory agenda. Financial regulation was very prominent in the initial stages of the G20 as a leaders’ forum, and this early emphasis saw significant successes. Over time, however, the success gradually gave way to a sense of disillusionment as the delivery of consistent outcomes was not sustained and the divergence among key jurisdictions became increasingly noticeable. Veron argues that the shortcomings are largely structural in nature, and that the G20 should identify and acknowledge the gaps in the institutional architecture during the Chinese Presidency in 2016 and the German 2017 G20 Presidency. Hannah Wurf cautions that the G20 should consider closely the way that it approaches target-setting. Poorly defined and measured targets with unclear burden-sharing responsibilities perpetuate uncertainty about the effectiveness and credibility of the G20. Wurf scrutinises three current, high-profile targets: the much-publicised ambition to lift G20 GDP by 2 per cent by 2018, the goal to reduce the gap in participation rates between men and women in G20 countries by 25 per cent by 2025, and the commitment to reduce the share of young people most at risk of being permanently left behind in the labour market by 15 per cent by 2025. These targets have added political momentum to addressing global challenges and allow the G20 to tell a compelling story to the public, but meeting the targets is proving challenging and the targets themselves face a variety of hurdles. Wurf concludes that the G20 cannot ignore the targets it has set and it would be fickle to abandon them. However, rather than setting new aspirational objectives, the G20 should to go back to basics: focus on cooperation and in communicating agreed outcomes, even if there is no headline-stealing outcome. Lastly, my paper focuses on the G20’s approach on climate change in the aftermath of the Paris Agreement. In Hangzhou, the G20 should provide its political endorsement of the Paris Agreement, and key individual countries such as China and the United States should continue to influence global norms by setting an example in their domestic actions to mitigate the effects of climate change. However, the diversity of views around the G20 table and fractious discussion means that it is unrealistic to expect a world-changing ‘signature’ outcome in Hangzhou where leaders signal their determination to take dramatic additional climate change action that exceeds the Paris Agreement. This is not to say that the G20’s hands are tied. Thanks to the innovative joint leadership displayed by the People’s Bank of China, the Bank of England, and the United Nations Environment Programme, discussions on promoting green finance and setting standards on climate disclosures holds the promise of additional, real action in years to come. A significant outcome from Hangzhou would be a clear signal that the G20 is on a path of transforming the talk that is taking place throughout 2016 into concrete policy. Such an outcome would reflect well on Chinese leadership in 2016. Also provided is a summary of policy options for the G20’s energy agenda that came out of the conference “From Knowledge to Action: G20 Global Energy Governance Innovation”, co-hosted by the Lowy Institute, the Shanghai Institutes for International Studies, the Centre for International Governance Innovation, and the Korean Development Institute, and held in Shanghai on 11–12 March 2016.