CIGI PAPERS NO. 46 — OCTOBER 2014 CHINA IN THE G20 SUMMITRY REVIEW AND DECISION-MAKING PROCESS ALEX HE CHINA IN THE G20 SUMMITRY: REVIEW AND DECISION-MAKING PROCESS Alex He Copyright © 2014 by the Centre for International Governance Innovation The opinions expressed in this publication are those of the author and do not necessarily reflect the views of the Centre for International Governance Innovation or its Operating Board of Directors or International Board of Governors. This work is licensed under a Creative Commons Attribution — Non-commercial — No Derivatives License. To view this license, visit (www.creativecommons.org/ licenses/by-nc-nd/3.0/). For re-use or distribution, please include this copyright notice. 67 Erb Street West Waterloo, Ontario N2L 6C2 Canada tel +1 519 885 2444 fax +1 519 885 5450 www.cigionline.org TABLE OF CONTENTS iv About the Author iv Acronyms 1 Executive Summary 1 Introduction 2 A Chinese Review of China in the G20 Summitry 9 Foreign Economic Policy Making in China and Its Impact on China’s Participation in the G20 12 Conclusion: China’s Gains and Weak Points in the G20 Summits 13 Acknowledgements 14 Works Cited 20 About CIGI 20 CIGI Masthead CIGI PAPERS NO. 46 — OCTOBER 2014 ACRONYMS ABOUT THE AUTHOR BRICS Brazil, Russia, India, China and South Africa FSB Financial Stability Board G7 Group of Seven G8 Group of Eight G20 Group of Twenty IMF International Monetary Fund MAP Mutual Assessment Process NDRC National Development and Reform Commission Xingqiang (“Alex”) He is a CIGI visiting scholar. Alex is a research fellow and associate professor PBoC People’s Bank of China at the Institute of American Studies at the Chinese Academy of Social Sciences (CASS). At CIGI, he is RMB renminbi focusing on interest group politics in China and SDR special drawing right their roles in China’s foreign economic policy making, China and the Group of Twenty (G20), WTO World Trade Organization and China and global economic governance. In 2009-2010, funded by the Ford Foundation, Alex was a visiting scholar at the Paul H. Nitze School of Advanced International Studies, Johns Hopkins University in Washington, DC. In 2008-2009, he was a guest research fellow at the Research Center for Development Strategies of Macau. In 2008, he participated in a short-term study program at the Institute on Global Conflict and Cooperation at the University of California at San Diego, which was sponsored by the US Department of State. In 2004, he was a visiting Ph.D. student at the Centre of American Studies at the University of Hong Kong. Alex has co-authored the book A History of China- U.S. Relations and published dozens of academic papers and book chapters both in Chinese and English. He also periodically writes reviews and commentaries for some of China’s mainstream magazines and newspapers on international affairs. Alex has a Ph.D. in international politics from the Graduate School of CASS. Before beginning his Ph.D., he taught international relations at Yuxi Teachers College in Yunnan Province, China. Iv • CENTRE FOR INTERNATIONAL GOVERNANCE INNOVATION CHINA IN THE G20 SUMMITRY: REVIEW AND DECISION-MAKING PROCESS EXECUTIVE SUMMARY Under this model, each ministry makes its own policy in its respective field, but major economic and monetary As the largest emerging economy, China believes that policies are made collectively by top leaders in the State the Group of Twenty (G20), instead of the Group of Council and the Politburo. In practice, the Politburo’s Eight (G8), is the ideal platform for its participation in advisory group in economic affairs — the Leading Group global governance. The G20, as the primary forum for for Financial and Economic Affairs — acts as the highest- global economic governance in the view of some Chinese level coordinating agency and it is widely regarded as scholars, reflects the new balance of power in the global the core economic policy-making body in China. China’s economy — with 11 emerging economies now counted as policy concerning the G20 is crafted by several major members. China secured the chance to play the role of a economic departments in addition to the Ministry of responsible power within global economic governance by Foreign Affairs, and coordinated by a vice premier who joining the G20. is responsible for economic and financial affairs. The People’s Bank of China (PBoC) and the Ministry of Finance China participated positively in the macroeconomic play key roles in handling all financial issues, while the coordination in coping with the global financial crisis and Ministry of Foreign Affairs is responsible for all bilateral promoting the recovery of the world economy in 2008 and relations and multilateral affairs among the BRICS (Brazil, 2009. By introducing a ¥4 trillion (about US$580 billion) Russia, India, China and South Africa) leaders. stimulus plan before attending the G20 Washington Summit, China joined the United States’ call for China has gained immensely from its participation in the coordinated large-scale fiscal stimulus. It also committed G20. Most importantly, it gained entry to the centre stage US$50 billion to bolster the International Monetary Fund’s of global economic governance by participating in the (IMF’s) crisis-fighting capacity. China gained a great deal, leaders’ summits. The G20 at the leaders’ level represented both domestically and internationally, in the first three G20 and proved to be a perfect platform for the country to leaders’ summits, and experienced relatively little pressure demonstrate that it is a responsible great power, and to from developed countries. communicate and maintain relations with major powers. China’s critical weaknesses within the G20 summit In 2010 and 2011, as the emphasis in the G20 shifted from process, from the perspective of some Chinese scholars, “strong” growth to “sustainable and balanced” growth, are the lack of capacity for agenda setting and crafting a China increasingly found itself in a defensive position, as strategic framework for engaging with other G20 nations, it began to receive strong criticism from the United States as well as inadequate communication and coordination over its exchange rate policy. This shift also reflected a among different government departments and between growing lack of cooperation among G20 members as a the Sherpa and financial tracks of the G20. whole. Chinese scholars, however, provide an additional angle to explain the transition in the G20, arguing that INTRODUCTION there still existed a fundamental unwillingness by major Western powers to share leadership with emerging The Asian financial crisis marked China’s first major foray markets. into international monetary affairs. Faced with mounting balance-of-payments challenges in the region, China At the 2011 Cannes G20 Summit, China continued to made the decision to forego depreciating its currency, defend itself, and avoided harsh language in the final the renminbi (RMB), despite sharp falls in the currencies statement on China’s exchange rate while promising of many of its major trade rivals. This choice proved to enhance exchange rate flexibility. From 2011 to 2012, pivotal for helping crisis-wracked countries avoid further China cautiously dealt with, and carefully responded to, downward pressure on their currencies, thereby easing the European debt crisis. China pledged US$43 billion the adjustment process. This was a watershed moment for in the IMF resource increase as an appropriate way to China’s role in international economic affairs. For the first assist Europe, which was deemed to be a strong measure time, the Chinese government realized it could play an of China’s interest. China resumed playing an active active role in the global community. China subsequently role in the G20 by proposing an open global market and began to become more involved in international economic responsible macroeconomic policy, after pressure on affairs (Breslin 2011; Wang 2013; Zhou 2007; Shao 2008). its exchange rate and global imbalances was relieved in Being viewed as a “responsible power” began to emerge as 2013 at the St. Petersburg summit. It also insisted on its a popular slogan in China (Das 2013; Xinhua News 2010a). own agenda for international financial system reform; in particular, raising developing countries’ voting shares and It was also the Asian financial crisis that prompted Paul representation at the IMF and World Bank. Martin, then Canada’s finance minister, together with Larry Summers, then US Treasury secretary, to conceive Since the 1990s, economic policy making in China can of a forum to deal with threats to global economic and be described as a collective decision-making process, financial stability, which required the cooperation of not embodied in a “dispersed-centralized” governance model. ALEX HE • 1 CIGI PAPERS NO. 46 — OCTOBER 2014 simply the Group of Seven (G7) nations, but also emerging addition to the Ministry of Foreign Affairs, and coordinated economies, including China (Ibbitson and Perkins 2010). by a vice premier responsible for economic and financial The result was the creation of the G20 at the ministerial affairs. The PBoC and the Ministry of Finance play key level. roles in handling all financial issues, while the Ministry of Foreign Affairs is responsible for all bilateral relations and Through the subsequent decade, China took several multilateral affairs among the leaders of the BRICS. critical, albeit tentative, steps to increase its participation in the governance of global economic affairs. China joined The paper concludes that China has gained immensely the World Trade Organization (WTO) in 2001 and played from its participation in the G20. Most importantly, China a significant role in the Doha Round of trade negotiations. entered the centre stage of global economic governance China also participated in climate change negotiations through the G20, which allowed the country to demonstrate under the United Nations Framework Convention on that it is a responsible great power, and communicate and Climate Change mechanism.