China Spells Out a Global Recovery Plan
Among countries that have moved from the periphery to the core, China has acquired a place of pride in a world that is no longer steered by the industrialized states of yesteryear. President Hu Jintao surfaced from the G20 summit in Cannes, as sagacious leader of a country whose ascent to the status of a new superpower was speeded up after the financial crisis in 2008.
**By Jaya Ramachandran**
The paradigm shift is taking place against the backdrop of a global economic situation in which major economies are experiencing slowdown, acute sovereign debt problems are plaguing some countries, volatility in the international financial markets persists, and emerging markets are under pressure from high inflation.
Besides, as Hu said on November 3 in Cannes, the turbulence in West Asia and North Africa continues, and extreme weather as well as frequent natural disasters have proved to be detrimental to the world economy. Subsequently, the global economic recovery is fraught with instability and uncertainty and encounters growing risks and challenges.
*”What has happened since the outbreak of the international financial crisis in 2008 shows that we are facing not just an economic and financial crisis,”* Hu rightly pointed out.* “It is a crisis that has exposed certain deficiencies in the existing institutions and mechanisms, policies and approaches, and ways of development.”*
This profound and palpable logic is hardly reflected in the 33-point ‘final communiqué of the G20 leaders’ summit, which French President Nicolas Sarkozy had put under the promising dictum: *”New World – New Ideas.”*
As Hu pointed out in his address to the G20 leaders, the world economy is now at a crossroads and global economic governance faces arduous tasks. *”It is imperative that we stand on a higher plane, transcend differences on specific issues, move beyond short-term considerations, and jointly seek ways to overcome the crisis and sustain development,”* said the Chinese leader.
*”As the premier forum for international economic cooperation,”* Hu added, *”the G20 must continue to demonstrate the spirit of standing together in times of adversity and pursuing win-win cooperation. At this critical moment, the G20 must work to address the key problems, boost market confidence, defuse risks and meet challenges, and promote global economic growth and financial stability.”*
Reminiscent of the *’Panchsheel’* – five principles of peaceful existence agreed between China and India in 1954 – Hu spelt out a five-point proposal on what G20 nations need to do to tide over the crisis.
First: Speed up the adjustment of our respective economic structures and endeavor to achieve fairly balanced growth of the global economy. The Chinese President pleaded for introducing new and strong measures to ensure that the fiscal and monetary policies are fully implemented and that funding is channeled into the real economy to boost production and employment.
Displaying an impressive insight into the need for sustainable economic development, Hu called for supporting the development of small- and medium-sized enterprises so as to help them speedily overcome the current difficulties by providing financing and fiscal support and tax incentives, thus laying a solid foundation for promoting economic recovery. *”We should fully tap into the potential of science and technology, nurture growth drivers and build up the internal dynamism of economic recovery,”* he added.
Second: Win-win outcome through cooperation. This proposal is based on a crystal clear analysis of the prevailing economic situation, which varies from one country to another and is marked by growing differences in terms of interest. This is turn is giving rise to rifts and frictions among them and leading to widespread panic and acute lack of confidence in the markets.
Precisely this grave situation shows the urgency of enhancing international coordination and cooperation, said Hu, and added:
*”We should strengthen unity and send a strong signal of pursuing win-win cooperation to the world so as to boost the confidence of the international community in global economic recovery and development”*.
*”We should strengthen consultation and coordination, introduce mutually supporting and complementing policy measures, and tackle sovereign debt risks, massive unregulated cross-border flow of capital and other financial risks.”*
Hu championed the cause of developing nations – lagging far behind emerging countries, when he said: *”We should keep the fluctuation of commodity prices under control, mitigate global inflationary pressure and make sure that the economic policies pursued by various countries do not offset each other.”*
Third: The compelling need to improve governance in the course of reform is underscored by the international financial crisis, which has highlighted the deficiencies in the global economic governance system, but has triggered a historic process of building a new system of global economic governance.
Hu said: *”We have taken note of the progress made in reforming international financial institutions and in the financial regulatory reform and the increase in the voice and representation of emerging markets and developing countries.”* And yet there is need for major efforts to reform and improve the international monetary system, international trading system and commodity pricing mechanism.
The Chinese President pleaded in particular for advancing the reform of the international monetary system in a steady manner, expanding the use of the SDR (special drawing rights) of the IMF (International Monetary Fund), reforming the SDR currency basket, and building an international reserve currency system with stable value, rule-based issuance and manageable supply.
Touching upon issues of profound concern to the developing and emerging countries, Hu said: *”We should be firmly committed to free trade, oppose trade and investment protectionism, move forward the Doha Round negotiations, reaffirm the commitment of not taking new trade protectionist measures, and work to build a fair, equitable and non-discriminatory international trading system”*.
*”We should work to make the commodity pricing and regulating mechanism more equitable and transparent, expand production capacity, stabilize supply and demand, strengthen supervision and curb speculation so as to maintain the stability of commodity prices at a reasonable level”*.
*”We should ensure global energy security and food security, and in particular, meet the energy and food needs of developing countries. We should remain firm in our resolve to advance reform and make continued progress towards the building of a more just and equitable system of global economic governance.”*
Fourth: Strive for progress through innovation. Hu argued that the current crisis has once again raised a serious and fundamental issue, namely, how humankind should conduct activities affecting production and livelihood.
The Chinese President appeared to be in quest of a golden middle when he argued in favour of advancing economic and social development, and striking a balance in such important relationships as those between government and market, labor and capital, production and consumption, and equity and efficiency.
*”We should bring into full play the basic role of the market in resources allocation while avoiding blind pursuit of profit and malicious competition. The government should play a key role in macro-regulation and upholding social equity and justice while avoiding being divorced from reality and keeping all responsibilities to itself,” said Hu siding with critics of “turbo capitalism”, as former German Chancellor Helmut Schmidt called it”*.
He stressed the need for vigorously pursuing scientific innovation and upgrading industrial technologies. *”At the same time,”* Hu said, *”we should continue to make creating jobs and improving people’s life our top priority, so that progress in science and technology and expansion in employment will complement each other.”*
He added: *”We should boost production and strengthen the material foundation for social development. At the same time, we should ensure more equitable distribution of income, so that growth in social productivity and improvement in people’s living standards will reinforce each other.”*
The emerging economies have miles and miles to go before they achieve that goal. However, this component of Panchsheel is of imperative relevance to post-war industrialized nations, particularly as they divorced the ‘social welfare state’ of which several European nations were rightly proud.
Fifth: Promote common prosperity through development. The Chinese President reaffirmed itself as the voice of the voiceless in the developing world when he stated that in the final analysis, the most serious bottleneck in world economic development is the inability of developing countries to achieve full development.
*”As a result, growth in effective global demand has not kept pace with the growth in productivity. For years, there has been an imbalance between developed and developing countries in terms of access to resources, wealth distribution and development opportunities. This has created a vicious circle where underdevelopment leads to backwardness and backwardness hinders development, thus hampering sustained and steady growth of the global economy,”* Hu said.
To speed up economic and social development in developing countries, he added, is a UN Millennium Development Goal, and it is the only way leading to global prosperity.
He called upon the international community to come up with new thinking and adopt new policies in this regard. He referred to the G20 Seoul Development Consensus for Shared Growth and the Multi-Year Action Plan are important to our efforts to narrow the development gap and promote common growth.
Affirming that China has come of age as a protagonist of emerging and developing countries, Hu said: *”We should further unleash the development potential of emerging markets and developing countries and boost the economic growth of developing countries in order to stimulate aggregate global demand”*.
*”We should continue to increase the voice of emerging markets and developing countries in global economic governance and create an enabling institutional environment for their development, as called for by the changing global economic landscape”*.
*”We should build a more equal and balanced global partnership for development, strengthen the North-South dialogue and South-South cooperation, intensify coordination and cooperation with the United Nations on development, and support the UN and its specialized agencies in continuing to play an important role in development.”*
As a developing country, China stands ready to promote mutual assistance with other developing countries and will work with them to advance durable peace and common prosperity of the world, Hu assured an array of developing and least developed countries barred from the G20.