G20: Options for Institutional Transition and Prospects

Yang Jiemian

G20: Options for Institutional Transition and Prospects

Yang Jiemian

The outbreak of the global financial crisis in 2008 precipitated the G20’s institutional upgrading. With the lapse of three years, the G20 is now in an institutional transition from being an effective mechanism in response to the global financial crisis to becoming an important platform for promoting international economic cooperation. In the course of this transition, different groupings of the G20 members which have divergent interests and concepts hold dissenting views on the transition. Therefore, they feel the need to seek common ground on the G20’s future development, guiding thinking, organizational structure, agenda setting, and effectiveness and legitimacy. With regard to the G20’s transition and future development, China’s basic strategy and mindset have gradually taken shape. China is devoting itself to the reform of the international system through the G20’s institutional transition.

I. Historical Process and Opportunities

In the course of history, necessity lies in contingency. The origin and development of the G20 have profoundly reflected the change in the international balance of forces that has taken place ever since the end of World War II as well as the reform process of the international system.

The G7/G8’s ability was short of its wishes in addressing many issues in global governance.

After World War II, economic development in developed countries and developing countries was proceeding on different tracks. The US dominance over the world economy was gradually replaced by shared dominance of major developed economies. In the earlier decades after the war, the United States, with its overwhelming economic power and military might, had dominated international trade and financial system and established its hegemonic position in global economic governance. However, under the impact of the financial crisis and energy crisis in the mid-1970s and being strained by the US-Soviet Cold War contention, the United States could no longer retain its economic and financial dominance. In order to maintain its superiority, the United States and six other Western powers formed the G7 as a core for their collective dominance. In its earlier years, the G7 was mandated to coordinate over economic policies among Western powers, seek a unified position on major international issues so as to maintain their vested interests and dominant position in the international system. After the Cold War was ended, as globalization was proceeding faster and global issues were becoming more pronounced, the G7 admitted Russia as a new member and the G7 became the G8. The G8 was evolving from being a core mechanism for coordinating the foreign policies of Western powers to being a core of global governance for coordinating over all international political, economic, security and social policies. However, with the rise of emerging economies, The G7/G8’s ability was short of its wishes in addressing many issues in global governance. Following the Asian financial crisis in 1997, the United States decided to urge the G7 to hold informal regular dialogue within the Bretton Woods system so as to hold extended discussions about economic and financial policies among major powers. Hence the initiation of the G20 meeting of finance ministers and governors of central banks as a supplement to the G7’s ministerial meeting. As the G20 was mandated to discuss economic and financial issues, its birth failed to resolve the issue of the G7/G8’s inadequacy and the under-representation of non-G7/G8 countries in global governance regimes. Developed countries in the West have tried to press emerging powers to accept the rules and arrangements made by the West through expanded dialogue and let the latter share more international responsibilities. As the world entered the new century, the“G8+5” dialogue began to take shape.

Developing countries and regions played an increasingly important role in the world economy after WW II. Beginning from the 1960s, the “four dragons” in Asia took off rapidly in their economic development by seeking markets, capital and technology from Western countries. At the end of the 1970s, China embarked on the path of reform and opening-up. In the meantime, Malaysia, Indonesia, Thailand and the Philippines in Southeast Asia were also developing rapidly. East Asia gradually became an economic powerhouse of equal importance to North America and Europe. After the world entered the 21st Century, new emerging market economies such as Brazil, Russia, China, India and South Africa began to rise as a new grouping of countries, whose GDP aggregate and annual growth assumed an increasing proportion of the world’s total. In 1989 when the Cold War came to an end, the combined GDP of the G7 countries was 62% of the world’s total whereas that of the six emerging powers – Russia, China, India, Brazil, Mexico and South Africa– was less than 8% of the world’s total; in 2009, the proportions reached 53.24% and 17.51%, respectively.

As a new world economic powerhouse, emerging market countries seek to increase the voice in global economic governance. Having succeeded in turning risks into opportunities during the global financial crisis that broke out in 2008, they are more proactive in rule-making and institutional building. In contrast, under the deep dual impact of the financial crisis and economic crisis, the G7/G8 countries were unable to meet the severe challenges during and after the crises. Against this backdrop, the “G8+5” dialogue was upgraded into the G20 Summit, marking a new phase of global economic governance.

II. Positions of Different Groupings in the G20

As the G20 members have divergent national interests and geostrategic thinking, their views on some major issues are not identical. In the past three years, there have been four major groupings of the G20 members, i.e. the US-EU-Japan, the BRICS countries, middle powers, and international organizations. The success of the G20’s transition and development depends, to a considerable degree, on their positions on such issues.

1. Grouping of the US, EU and Japan

The United States, the European Union and Japan are most powerful G7 countries which form the leading force of the old system, but they also realize that by creating a new system, the world can meet new challenges more effectively. The G20 Summit, initiated in the wake of the global financial crisis in 2008, was an endeavour made by the US-EU-Japan grouping to take advantage of the outer shell of the old system and inject elements of a new system into the old. Their purpose was twofold: Bringing the impact of the rise of emerging economies on the international system under their dominance, and urging these economies to assume more responsibilities for providing global public goods.

However, the United States, Europe and Japan decline to relinquish the G8’s traditional vantage ground in global governance. For instance, at the G8 Summit meetings in Italy, Canada and France after the G20 came into being, they were trying even harder to retain their decisive role on security and development issues, so that some people argued that the G8 was resurging. The G7 Finance Ministers were also focusing on financial issues when they met. For example, when Japan was hit by a disastrous earthquake in March 2011, the G7 immediately intervened in the Yen exchange markets.

The G20 members have divergent national interests and geo-strategic thinking.

After the Seoul Summit in November 2010, the G20 began to focus more on coordination over medium- and long-term economic issues. Outstanding differences among member countries have led people in many countries, including the United States and European countries, to be pessimistic about the G20’s future. Some people believe that the United States is less interested and plays a weaker leadership role in the G20. Former British Prime Minister Gordon Brown holds the view that the problem at the moment is “mini-lateralism”, that member countries “are all retreating into national shells” and that the G20 is “failing on a string of issues” on its mandate.

The differences between the US, the EU and Japan impair the G20’s effectiveness. Cases in point include the dispute over how to tighten supervision over the tax havens at the London Summit in April 2009, the controversy over how to reduce fiscal deficits and stimulate economic recovery at the Toronto Summit in June 2010 and the recent debate on the need to formulate indicative guidelines such as current account surplus or deficit in proportion to GDP. Moreover, the United States insists that as European countries are over-represented in the existing global economic governance institutions (the IMF and World Bank), they should transfer some of their quotas, voting rights and senior positions in both institutions to emerging economies. The European countries, on their part, are trying hard to retain their vested interests and cling to the “European core” – Germany, France, the UK, Italy, Spain and the EU –within the G20.

2. Grouping of BRICS countries

The BRICS countries – Brazil, Russia, India, China, and South Africa – will have an increasing voice and a more important role to play in creating a new international system, but at the same time they need to assume more responsibilities and may be placed under more restraints in the new system. These countries are anxious to contribute to the establishment of a new system, but hesitate at how much share of responsibilities they should assume.

As the BRICS countries cherish their historic opportunities to get excess to the global economic governance center, they advocate a more assertive role of the G20 in securing world economic stability and sound development, and foster the interests of all emerging market economies and developing countries in the G20.

The BRICS countries insist that emerging market economies and developing countries should have a bigger say and increased representation in international financial institutions. With joint efforts by the BRICS countries and other emerging market countries, the combined quotas of developed countries in the IMF have been reduced from 60.5% to 57.7% whereas those of developing countries have increased from 39.5% up to 42.3%. The World Bank Development Committee has also agreed upon the reform of voting rights by which developed countries would transfer 3.13% of their voting rights to developing countries. In other words, the combined voting rights of the latter would increase from 44.06% to 47.19%.

The BRICS countries have proposed to create a stable reserve currency system. They call for enhancing the role of the special drawing rights, and have expanded the scope of local currency settlement in bilateral trade. Brazilian Finance Minister Guido Mantega has proposed to introduce a new reserve currency system composed of USD, EUR, JPY, GBP, RMB and BRL.

The BRICS countries insist that the G20 should strengthen global financial supervision and reform, and reinforce policy coordination and cooperation in financial supervision among member countries. They are against attempts by US-led Western countries to take the exchange rate policy and current account form of profit and loss statement as global economic indicators; they criticize the US quantified easing policy which has brought high inflationary pressures to bear upon emerging economies; and they call for strengthening global financial supervision and reducing the impact of hot money in international financial markets on emerging economies. Moreover, they urge all G20 members to join in close cooperation so as to prevent excessive price fluctuation of bulk commodities.

3. Grouping of middle powers

All middle powers in the G20, both developed countries and developing countries, attach great importance to the G20 which serves as a major platform for international economic cooperation and, acting in the capacity of the G20 members, ensure for their own entitled rights and interests.

Mexico regards the G20 as a new platform for global governance and an international regime under which to raise its own international standing. Taking advantage of its capacity as the upcoming presidency of the G20 Summit in 2012, Mexico is pursuing a “grandiose” foreign strategy. Turkey persistently takes a “low profile” in defining itself as a developing country. It firmly insists that it should serve as a link and bridge between the developing world and the G20. Though Argentina also attaches great importance to the G20, it does not hesitate to contend with other member countries in order to protect its own interests on agricultural issues. Australia is eager to play a leadership role in making rules and norms of free trade in the G20 and, by relying on its powerful financial strength at home, seeks to take a vantage point in the reform of international financial rules. Spain as a “permanent invitee” of the G20 is trying hard to seek opportunities for becoming a formal member and playing a “central”, rather than the “marginal”, role in the G20.

4. Grouping of international organizations

Although the IMF, the World Bank or other international financial institutions are not formal G20 members, they are the G20’s stake-holders or are expected to carry out the G20’s decisions.

As beneficiaries of the G20 Summit, the IMF, the Basel Committee on Banking Supervision and the Financial Stability Council are all in favor of strengthening this mechanism. The IMF had already been in a serious crisis before the outbreak of the global financial crisis in 2008. As the financial crisis and the creation of the G20 Summit have enabled the IMF to gain renewed resources, dynamics and a new sense of mission, so that it has maintained or expanded its influence. Like the IMF, the World Bank has also benefited from the growth of the G20 in terms of resources, motive power and institutional reform, but it is more concerned about development issues and an all-round reform of the international financial system. The World Bank President Robert Zoellick holds the view that the G20 must look beyond the Britton Woods System, take up a package reform of the global monetary system, economic structure and trade liberalization, render more support to developing countries in infrastructure and capacity building, and pay more attention to food security. The World Trade Organization has also benefited from the G20, but it believes that the G20 is a workable, but not very proactive response regime, because it has failed to break the stalemate in the Doha Round negotiations. The United Nations’ attitude toward the G20 is more complicated. In the world today, the United Nations is still the most broadly represented international governmental organization, but it is ineffective in decision-making, and is marginalized by the G7/ G8 on certain political and economic issues. The growth of the G20 is a challenge to the role and authority of the UN. There is a view that as the G20 broadens its agenda, the UN mandate might be further eroded. The Commission of the United Nations General Assembly on the Reform of the International Monetary and Financial System proposed that it was necessary to set up a 20-25 member economic commission in the UN to replace the G20. But in view of the difficulty of undertaking a major reform, the United Nations generally acknowledges the significance of the G20 and tries to use this new institutional platform to assert its legitimacy and authority and enhance the UN role so as to strengthen the complementarity between them through cooperation and prevent itself from being replaced by the G20. Shortly after the creation of the G20 Summit, UN Secretary-General Ban Ki-moon proposed on several occasions that the G20 Summit meetings be held at the UN Headquarters in New York. Later on, he called on the G20 to pay more attention to the more vulnerable developing countries and issues such as food security, climate change, the UN Millennium Development Goals.

III. Options for the G20 in the Course of Its Transition

As is mentioned above, the creation of the G20 is a choice made by the international community in the course of history. In the course of its structural transition, the G20 must also make a historic choice about its own future. The upgrading of the G20 is a kind of self-reform in the existing international system to cope with the trend of time. But as a new international regime, the G20 hinges on five major factors for its sustainability and vitality, namely, its future development, guiding thinking, organizational structure, agenda setting, and effectiveness and legitimacy. And it is confronted with greater challenges than the G7/G8. As far as the 3-year-old G20 Summit is concerned, it has the following options:

The upgrading of the G20 is a kind of selfreform in the existing international system to cope with the trend of time.

Regarding the G20’s future development, there are three major issues that have been under debate within the G20. First, should the G20 continue to be a provisionary platform for crisis management, or should it be a permanent mechanism for global economic governance? Most G20 members are in favor of the latter; secondly, if the latter is the case, should it focus on both economic and political issues, or should it still focus on economic issues, especially financial issues? The majority of the G20 members have, to date, maintained that they should wait and see, rather than jumping at any hasty conclusion. They believe that ultimately, it would probably depend on how the role and influence of emerging countries on other agenda items would evolve; and thirdly, on the question of how to define the role of the G20 among all global governance institutions, most G20 members hope that the G20 should properly handle relations with the existing international institutions in a way characterized by“substitution”, or “complementarity”, or “cooperation” on the merit of each case.

With regard to the guiding principles, confronted with new challenges, Western liberalist market economic theories have gone through significant revision on the relationship between the state and the market, which has a considerable impact on the evolution of the G20. First of all, the outbreak of the Asian financial crisis in 1997 and the global financial crisis in 2008 indicate that there is a big difference between liberalization of financial markets and trade liberalization and that the international community has gradually acknowledged the necessity of strengthening financial supervision. This will continue to be an area of major concern of the G20 Summit in future. Secondly, growing concern about environmental issues has constrained the expansion of liberalism. Thirdly, structural changes in international relations have brought about changes in domestic political developments in Western countries with prominent surge of economic nationalism, popularism, and trade and investment protectionism, which finds expression in the recent European debt crisis. Fourthly, diffusion of economic power centers and the rise of global governance call for greater institutional legitimacy. This is an important issue the G20 must face in all seriousness and handle properly.

With respect to institutional building, there are three scenarios in the G20: The first scenario is strengthening the G20 and weakening the G7/G8. By strengthening the G20, it will have two prospects – “entity” and “flexible structure”. By “entity”, it means consistently strengthening the G20 mechanism, in other words, turning the forum-like G20 Summit into an entity, including setting up a secretariat, having a relatively fixed agenda, a fixed number of members, and improving restraint and evaluation mechanisms, etc. “Flexible structure” is meant to continue to keep the G20 as a “soft regime”. In other words, it will continue to invite the participating members to the annual“G+X” meeting and the country holding the rotating Presidency coordinates with member countries on annual agenda items, focusing on outstanding issues in the current year.

The second scenario may be called “dual-track” or “multitrack” structure. For instance, “major multilateral tracks” and“mini-multilateral tracks” co-exist side by side, namely, the G7 countries of the West and the BRICS countries play their respective roles in their own capacity.

The third scenario is “mission accomplished”. In developed countries, there is a view that the G20 has accomplished its mission of crisis management and that the G7 and NATO should play the leadership role in global political, economic and security affairs. Non-G20 developing countries insist that a UN-like international organization should replace the G20 which is blamed for not having full legal authority and universal representation. In short, as some scholars point out, the institutional renovation of the G20 Summit is aimed not at formulating a set of rigid rules and procedures, but at enhancing the G20’s leadership role and procedural conception and facilitating its effective transition.

With regard to agenda setting and effectiveness, the G20 is facing the following alternative: In the near term, should the G20 continue to focus on financial reform, or should it shift its focus onto promotion of trade liberalization? There is a view that financial issues often involve in-depth conflicting interests, such as reform of the international monetary system and how to keep the monetary policy of major reserve currency issuing country within certain bounds, whereas it is much easier to accelerate the Doha Round negotiations. The trade negotiations between the US-led developed countries on one side, and India and other developing countries on the other over the trade of agricultural products are coming to the final juncture. According to the principle of tackling manageable issues first and proceeding gradually from there to thornier ones, the G20 should move its focus from financial issues to trade disputes as soon as possible. But this view has aroused much doubt and criticism. As trade protectionism is raising its head in many Western countries, prospects for concluding the Doha Round negotiations in the near future are dim, not to mention the fact that such negotiations involve conflicting interests of many countries and those between different departments and sectors in member countries so that it is extremely difficult to resume policy coordination. In the medium- and longer-terms, should the G20 continue to focus on economic issues, or should it take up both economic and political issues? Though this question has already been mentioned above, the author wants to further emphasize here that the range of agenda items of the G20 meetings may directly affect the G20’s effectiveness, though there is no perfect solution. A broad range of agenda items is helpful for the G20 Summiteers to bargain on different items and reach consensus. But if the agenda items are too broad-ranging and diversified, the Summit meetings might lose sight of priority issues and impairs the way to find solutions to substantial issues. However, if the G20 summit is placed on a permanent and institutionalized basis, it can discuss all kinds of issues on the agenda from a strategic perspective and let ministerial meetings handle more specific issues for implementation.

With regard to the G20’s representation and legitimacy, upgrading of the G20 has rectified the under-representation of the G7/G8, but it is still questioned and criticized by non-G20 countries. There is a view that if the G20 is to be transformed from a crisis response mechanism to a permanent economic governance regime, more non-member countries should join the G20. As is proposed, while its core members remain unchanged, the G20 should invite some non-member countries to join. For instance, as may be required by its mandate and agenda, and taking regional balance into account, the G20 needs to invite the participation of more non-member states.

IV. China’s Strategic Thinking about the G20

The G20’s transition and growth have a direct bearing on the world’s economic and political developments. Being an important member of the G20 and an emerging economy, China attaches great importance to the G20’s transitional choice and future development. China’s strategic thinking about the G20 has gradually taken shape, and it will continue to develop and mature. Major elements of such thinking are as follows:

1. The G20 may serve as a gripping hand to facilitate peaceful transition of the international system.

China is a developing country. Ever since the 1970s, China has consistently held the view that reform of the international system should move toward building a fairer and more reasonable new system. China has gradually taken a new outlook of the international system that keeps pace with the times. And the upgrading of the G20 has provided a good venue for China and other members to make concerted efforts for peaceful transition of the international system.

China hopes to see broader representation of the new international system through its efforts in the G20. China believes that the Western-led international system in the post-WWII time is under-represented, and especially Western powers have failed to take the interests and demands of vast numbers of developing countries into account. It is China’s view that in the course of building a new international system, a nation’s economic strength and contribution to the world economic growth should not be the only denominator of its international standing and that many other factors – geographical, historical, and cultural – should also be taken into account. The G20 marks institutional rectification of and progress over the G7/ G8, and yet it still needs to gradually broaden its representation through improving its institutional structure and enhancing interaction with non-G20 actors.

China’s strategic thinking about the G20 has gradually taken shape.

China hopes to see a fairer new international system. The word “fair” is used here in a relative sense. First, as is relative to the old international system, the new system should show greater fairness in the balance of rights and obligations, the G20’s membership line-up and the reform of the IMF and World Bank, and new emerging countries should play a greater role in the new international system. Secondly, as is relative to rights and interests of developed countries, the G20 should be more concerned about those of developing countries, and especially those of the least developed countries which are marginalized in the existing international system. China does not just take care of raising its own standing in the G20, but also considers the rights and interests of other emerging powers, and particularly urges developed countries in the G20 to give due consideration to the rights and interests of non-G20 developing countries. And finally, as is relative to the current phase of transition, the G20 must demonstrate greater fairness and legitimacy in the transition in its rules and norms in future. Since it is only three years since the G20’s inception and the G20 has just begun to make rules and norms, it inevitably has many traces of the old international system. But in preparations for setting up new mechanisms and making new rules, it is important for the G20 to take a long-term view in treating developing countries in a fair manner.

China aspires to contribute to more effective international economic governance through the G20. China is of the view that as a major platform for international economic governance, the G20 should become an effective regime in crisis management, agenda setting and problems solving. First, the G20 played a pivotal role during the 2008 global financial crisis, but it should continue to work effectively, or ever more effectively, in the post-crisis years to boost the world economic recovery and growth in a vigorous, balanced and sustainable manner, and exercise effective supervision over international financial activities. Secondly, the G20 is facing greater challenges in the agenda setting in the era of economic globalization. World economy is becoming more complex and it is more difficult to foresee future trends and set priority agenda items. Moreover, letting the country holding the rotating presidency determine the priority agenda items of the G20 Summit meetings is lopsided and should therefore be reconsidered for change from a strategic perspective of institutional building. Thirdly, effective solution of problems involves many more countries, which makes things more complicated. The G20 is a “soft” dialogue regime for leaders of its members. Therefore, any resolution or final statement adopted at a Summit meeting needs to be implemented by other international institutions and various relevant actors. To solve problems effectively has a direct impact on the vitality of the G20 and is one of important benchmarks that indicate whether or not the G20 receives consistent support from the international community.

2. The G20 provides a good platform for China to improve diplomatic ties with other major powers and middle powers.

The G20 provides ample diplomatic space and room for improving cooperative relations between China and other members and enriches China’s diplomacy in terms of connotation and denotation.

The G20 gives an impetus to constructive relations between China and traditional big powers. China and the United States are a major driving force for enhancing the G20’s role. The two countries both contend and cooperate with each other in global financial governance and promote bilateral cooperation through multilateral cooperation. The G20 enables China to have more global confluence of interests in relations with France, the United Kingdom, Germany and other Western powers and boosts their interaction in a more extensive scope.

The G20 enhances multi-echelon cooperation between China and emerging market countries. At the global level, interaction between China and these countries in and out of the G20 serves to facilitate the restructuring of the international system. The BRICS Summit convened in parallel with the G20 Summit has diversified and pluralized the institutional nature of the G20. The BRICS countries have not only strengthened their policy coordination and institutional cooperation, but also fostered mutual understanding with other emerging market economies. This serves to strengthen the role and influence of all emerging market economies. Cooperation between China and emerging market economies in different regions has strengthened regional cooperation and trans-regional cooperation. The G20 also highlights the strategic significance of China’s bilateral strategic cooperative partnerships with Russia, India, South Africa and Brazil.

The G20 also enables China to carry out multi-form cooperation with various middle powers. China and developed middle powers such as Australia and Canada have shared interests in maintaining stability in energy and resources markets. China’s cooperation with Italy and Spain in financial exchanges and investment is of positive significance. China’s cooperation with neighboring middle powers, such as the ROK and Indonesia, serves to enhance the international standing of all Asian countries. China’s cooperation with middle powers in the Middle East, such as Saudi Arabia and Turkey, in the framework of the G20 has deepened relations and mutual understanding between China and the Arab/Islamic World.

3. The G20 is an international arena on which China acts as a responsible major power.

First of all, China is reinforcing its domestic foundation for being such a country. It is embarking on a path of scientific development and is making an all-out effort in the development of economic, political, social and ecological civilizations, thereby enhancing the domestic foundation for being a responsible major power. It goes without saying that the enhancement of China’s comprehensive national strength and the fact that China is an important member of the G20 are closely interrelated. Secondly, China, backed by its growing national strength, is injecting powerful dynamics into the G20 for peace, development and cooperation. In response to the global financial crisis in 2008, China and developed countries were “sitting in the same boat”. China does not challenge the dominant position of the US-led Western countries in the institutional building of global economic governance, nor does it seek self-interests at the expense of the vital interests of the countries concerned and disrupt the normal functioning of the existing international institutions; instead, China sets store by universal interests of the international community and stands in favor of a gradual reform of the international system which is acceptable to all countries. And finally, China seeks common ground with all parties concerned in the G20 on its guidelines and values, such as the concepts of across-theboard coordination for the path of sustainable development, putting people’s well-beings first, and peaceful consultation and peaceful co-existence, etc.

4. The G20 is a good platform where China may put its vision of global economic governance into practice.

At the G20 meetings, China has expounded before the world community its views on national development and world economic expansion and what it has been doing for the goal, demonstrating its success story of how to become an emerging power. Meanwhile, China and other emerging powers are coordinating more closely in the framework of the G20 through concerted efforts to create “mini-multilateral”mechanisms. China attaches great importance to summing up the G20’s experience and proposing forward-looking ideas and suggestions. While learning from all countries, China has put forth many new ideas and guiding principles for global economic governance – financial governance in particular – such as“sharing weal and woe” and “more cooperation, no confrontation”. With a view to promoting vigorous, sustainable and balanced world economic expansion, China has proposed that the G20 should improve its institutional structure for coordinated development, foster trade liberalization for coordinated growth, and improve financial systems for stable development. These proposals which are conceived with a strategic vision and are also practical have received a positive response from the world community. Moreover, China has made the following endeavors for the success of the G20:

First, it has proactively collaborated with other major economies in the G20 framework to stabilize the US and global financial markets, provided the IMF and other international financial institutions with additional financial resources, and signed currency swap agreements with a number of countries, thereby successfully preventing the financial crisis from deteriorating and spreading all over the world and forging a solid basis for the G20’s crisis management capacity.

Second, it has taken the lead in the G20’s coordination among member countries to stimulate economic recovery and adopted a proactive fiscal policy for boosting domestic needs. This has enabled the Chinese economy not only to continue to grow rapidly, but also become the most powerful engine in boosting the world economic growth, and secure greater credibility for the G20 in promoting global economic expansion.

Third, together with many other countries, it has taken a clear-cut stand at every G20 Summit meeting against trade protectionism. By so doing, China has contributed to preventing trade protectionism from spreading to every corner of the globe and enabling the G20 to be a major facilitator for international free trade.

Fourth, it has proactively participated in the G20 discussions of all related issues, including financial supervision, petroleum subsidies, price stability of bulk commodities and the indicative guidelines. It has put forth many constructive proposals at the G20 meetings, assisting the G20 in acting as an allencompassing global economic governance regime in its true sense.

And fifth, it attaches great importance to the interests and concerns of all developing countries and less developed countries. It has supported the Republic of Korea in placing the issue of development on the agenda of the G20 Seoul Summit. This would help the G20 overcome its past deficiency in tackling the issue of global economic governance and garner more support from the international community.

V. Conclusion

At present, reform of the international system emanating from the financial sector is proliferating to other sectors. Meanwhile, the G20 is also in transition from being a regime in response to the international financial crisis to being a major platform for international economic cooperation. Both trends are in parallel and complementary. Ever since the run-up to the G20 Summit, China has been making unremitting efforts together with the parties concerned in response to the international financial crisis and has been a major driving force in creating a fairer and more reasonable international system. The past three years are the first phase of the G20’s birth and initial success in its growth. And the next few years will be the second phase in which the G20 will gradually become a major platform for international economic cooperation. The G20 will take up a more demanding mission in its second phase than in the first phase, but it will also be of more profound and far-reaching significance. To this end, it is imperative for the G20 to make continued efforts to close its ranks, seek common ground while reserving or resolving differences so as to build on consensus for shared goals and future direction, accumulate adequate material force for development and reform, and enhance its legitimacy and effectiveness. Looking ahead, despite the fact that many difficulties and hazards may lie on the path of the G20, the international community has reasons to be cautiously optimistic about the success of the G20’s transition, because the future direction of the G20’s growth is in keeping with the trend of our times characterized by peace, development and cooperation.

The international community has reasons to be cautiously optimistic about the success of the G20’s transition.

Yang Jiemian is Senior Research Fellow and President of Shanghai Institutes for International Studies.