Millennium Post

SCS verdict casts shadow over G-20

China is hosting the G-20 Summit at Hangzhou on September 4 and 5, amidst widespread opposition by the G-20 members against its stand on the recent verdict by the UN Permanent Court of Arbitration nullifying China’s “nine-dash line” territorial claim over much of the South China Sea. This is a very embarrassing position for Beijing as the Chinese President is expected to focus on the theme of “Building An Innovative, Invigorated, Interconnected and Inclusive World  Economy”. But the wide differences between China and the majority of the G-20 members will be apparent at the Summit since the issue is of international importance. Some Asian members, especially the Philippines, will surely raise the issue unless a prior understanding is reached before the summit to avoid the issue.

Apart from this controversial South China issue, the Hangzhou summit in September is being held in the context of the Britain’s decision to quit the European Union and the consequent impact on the global economy. The issue of terrorism has got wider dimensions and all the developed countries are threatened. The ISIS has become a far bigger menace in the last one year. The failed army coup in Turkey which hosted the last G-20 Summit has left many crucial issues of democracy and fight against terrorism unanswered. In this global perspective, the China hosted summit has to carry on discussions on building an inclusive world economy which will be interconnected.

China and India are among the least affected countries as a result of Brexit. For a long time, China has been a big contributor to global economic growth with its contribution rate once reaching 60 percent. And even in the present reduced new normal economy, the figure still stands at 30 percent, the highest in the world.

In setting the Hangzhou agenda, China has established “building an innovative invigorated, interconnected and inclusive world economy” as the main theme. China has proposed four key priorities: innovative growth modes, more efficient global economic and financial governance, robust international trade, and investment and inclusive and interconnected development. China aims to focus on the world economy and global environment which it sees as the G-20’s job. Beijing does not want to mix up the global agenda with its private affairs. This makes the world’s expectations for the G-20 summit hosted much clearer. China will show its leadership capability in helping out finding a solution to the Brexit hit global economy since the turmoil is expected to continue and further developments might take place in Europe by the time the summit is held in September.

At the 10th G-20 summit in Turkey last year, Chinese President Xi Jinping delivered an important speech entitled “Innovative Growth That Benefits All”. He pointed out that China has the confidence and the ability to sustain a medium and high growth rate and continue to create opportunities for all countries to develop. He said that China’s new growth momentum is accelerating and in the coming five years, will release a huge demand and become the world’s new source of growth. This China Plan proposed at the 2015 summit was a signal that China has taken to become a big country in global economic governance within the G-20 framework. As the host of the Hangzhou summit, this year, China is determined to  follow up the  programme with the assurance to the G-20 leaders that it will contribute a lot to facilitate the process of ensuring stability to the global financial system by removing some of the distortions.

As regards India, Prime Minister Narendra Modi will focus on the need for concrete action programme by the G-20 members to deal with the latest volatility and turmoil in the global economy as a result of the Brexit. Mr Modi’s emphasis will be that the turmoil is taking place as a result of the policies and conflicts among the rich countries and the emerging economies like India should not pay a price for that. Indian PM will underline the need for following up the decisions taken at the 2015 summit along with chartering some urgent steps to ease the tensions in the European Union.

India will push for poverty alleviation agenda and sustainable development besides trade and investment at the G-20 summit. As the Indian officials point out the emphasis is not on just trade and investment. But the issues have been there in G-20 and China is trying to take it to a higher level. India wants to connect this to the issues of poverty. India is equally determined to fight money laundering tax evasion and terror financing and wants that the tax havens must establish transparent norms and share information. India wants G-20 summit to take concrete action on this. India has pitched for a more coordinated effort by G-20 to boost global growth. India’s position is that the countries must avoid trade protectionism measures and refrain from competitive devaluations of currency as greater focus must be on public investment.

Prime Minister Narendra Modi is of the view that the global economic growth remains weak with a slowdown in several major economies, volatile financial markets and competitive devaluation of currencies and to stimulate growth, the need is there to stimulate public investments - not just reliance on monetary policy. Modi feels that G-20’s continued call to the Central banks for careful communication on monetary policy actions will be helpful in keeping financial and currency markets stable. That way, Indian position is that multilateral development banks should enlarge their capital base to support infrastructure needs of the developing countries. New institutions, such as the New Development Bank are welcome additional sources of financing.

India is of the view that though there is a global consensus on the need to address climate change, multilateral institutions should not impose such difficult safeguards and conditions on loans that they become barriers to development in many countries and undermine sustainable development. India is expected to make the point that G-20 efforts must be aligned with the UN Sustainable Development Goals, particularly the goal of elimination of all poverty by 2030. India believes that stable long-term global economic growth requires not just capital flows but also efforts to facilitate labour mobility and skill portability.

India has a firm view on dealing with energy security. India has targeted additional 175GW of renewable energy by 2022, cut back on subsidies on fossil fuel and imposed carbon cess on coal India is working on clean coal technology. By 2030, India hopes to have 40 percent of the country’s energy through non-fossil fuel. At G-20, India is looking for concrete programmes to increase research and development in clean and renewable energy and reduce coal and make it affordable and accessible to all. Further, there should be an increase in financial support and technology transfer to increase access and transition to clean energy and measures to develop proliferation-resistant nuclear energy technology. India also wants G-20 to promote an integrated global gas market and give greater voice to the emerging economies in the global governance structure for energy.

During the next six weeks, if the Chinese President through his diplomatic dexterity is able to keep the heat of South China Sea verdict out of the agenda, there is a good scope for the summit to take some solid steps to deal with the ills of the global economy. China and India have to show their leadership capability to make it yield results.  

(The views expressed are strictly personal.)
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