G20 and World Economy

  2013/9/29 source：

In the third cession, the participants talked about world macroeconomic growth and financial stability. Japanese scholar analyzed the effects and risks that Abeconomics might produce. Abeconomics has three arrows, i.e. monetary policy, financial policy and economic growth strategy. If there is the fourth arrow, that is the 2020 Tokoy Olympics. Abeconomic has changed people’s perception about Japanese economy. This is its largest effect. But there are much more supply of money in the market, but the money has not been invested into real economy. Wages and consumption have not increased. IMF has warned Japanese government if economic structure cannot be reformed, a serious risk of inflation will be caused. As for the spill-over effect that Abeconomic brings, Japanese scholar admitted there were conflicting interests between world economy and domestic politics sometime.

As for the problem of American exit from QE policy, American scholar considered the US Fed does not target any currency for its monetary policy, but only target its own domestic development. As for the spillover effect of QE policy, he thought even though the US and Japanese easing monetary policies have some negative spill-over influences, the economic growth of the world largest and third largest economies will bring benefits to other countries. G20 provides a platform to promote conversation about world economy, and every country should coordinate to make world economic growth more balanced.

Chinese scholar pointed out the reason that caused financial crisis was the dollar based international monetary system. Once the US exited from QE, emerging markets will face financial instability. There are three possibilities for international monetary system, i.e., world currency, multi-polar currencies and dollar-based system. The second one is the most practical, for which the internationalization of RMB will be a contribution and direction.  Indian scholar also pointed out, emerging economies’ problems were caused partly by themselves, but mainly from developed countries.

On international financial system reform, Russian scholar pointed out that financial regulations are still at the core of G20 agenda. G20 has made a lot of successes on improving international financial regulations, but there are still a lot of issues to solve. Canadian scholar believes that the MAP is a big success for G20. Collaborative measures on economic growth are needed. We’d better to separate investment bank and commercial banks. This is a major issue worth of discussion. Now shadow banks are playing big roles in Chinese economy, about 25% of China’s GDP. There is controversy about its role, function and risks.

In the fourth cession, the participants discussed the problem of global trade and investment. Australian scholar said that from 2008, Doha round has fallen into stalemate. The biggest achievement for this year’s G20 Summit on trade is its emphasis on transparency on PTAs. Currently, the US leadership is not in WTO, but in TPP and TTIP. There are differences among the two, e.g., the former is more about trade while the latter more about investment, as US and Europe trade relationship is already pretty matured. RCEP has the potential of becoming the largest PTA in the world. But in economy, but it will not be a competitor with TPP, since the two are quite different in approaches and contents. RCEP is a “20th century agreement” focusing on traditional trade issues while the TPP is the “21st century agreement” focusing on issues beyond tariffs, such as domestic regulation. But the above three PTAs may worsen geopolitical competition. Indian scholar expressed his dissatisfaction about the exclusiveness of them.

As to the problem of PTAs and Sino-US relations, Canadian scholar believed China is not permitted to participate TPP now, but China is determined to continue its opening policy. With the China Shanghai FTZ experiment, the liberalization of finance will become a part of it.

Canadian scholar thought in the past ten years, the world trade system has changed dramatically. Now 50% of the world trade is about service and 50% occurs among developing countries. With the proliferation of PTAs, diplomatic interests are brought back to trade relations and trade policies become tools of foreign policy again. TPP, TTIP, and RCEP will pose risks to global governance structure. There are lots of convergences among PTAs. Another scholar pointed out China and US have different interests on signing BIT, i.e., the former more on protection of assets, while the latter more on market access. But another participant added China has become the world’s 3rd largest outward FDI provider and therefore market access is also a key interest for China.

Chinese scholar pointed out EU, the US, and Japan established a lot of FTAs, but with different inerests. The developed countries want to redistribute trade interests by rebuilding rules. One of the aims is to balance the economic influence of China, or to pose pressure to advisories. FTA has geopolitical intention. But it seems that emerging economies are not interested in establishing FTAs between or among them. TPP and TTIP should be more inclusive. As for TPP, China is changing its attitude. China Shanghai FTZ experiment is a national opening strategy instead of a local one. American scholar suggested APEC could consider the issue of integrating TPP and RECE in the long term. Even the G20 should talk about this issue.