G20 offers China a chance to save the world economy – by saving its own

by Andy Xie / 28 August, 2016 / South China Morning Post

China is heavily invested in the G20 summit in Hangzhou (杭州) to ensure its success. But, how should success be defined? Since its inaugural meeting in 1999, it’s hard to recall any significant success from G20 summits. Violent anti-globalisation protesters tussling with heavily armed police seem to be the most memorable G20 imagery. One thing we can be sure of is that the Hangzhou summit will have none of that. But, apart from exquisite dinner banquets and perfect group photos of global leaders by the West Lake, could this summit achieve more?

If not, it would be a great pity. The world is at its most critical juncture since the end of the cold war in 1989. The global consensus on globalisation is broken, especially among its main promoters in the West. It is largely a consequence of mistakes made by the Western elite. They didn’t take policy measures to help those whose wages were dragged down by globalisation. And they took advantage of low inflation due to global competition to pursue expansionary monetary policies, which inflated non-tradeable sectors like housing, education and health care, enriching a small minority of asset owners by squeezing the middle class.

The political backlashes could throw the West into a prolonged period of instability. It may end globalisation as we know it. China has been the largest beneficiary of the globalisation in the past quarter of a century. It has more at stake than anyone else, and should do something about it.

If China stops overinvesting and balances its economy, the global economy would receive a huge positive boost. The resulting virtuous cycle would sharply decrease the negative sentiment towards globalisation.

The political backlashes could throw the West into a prolonged period of instability. It may end globalisation as we know it. China has been the largest beneficiary of the globalisation in the past quarter of a century. It has more at stake than anyone else, and should do something about it.

If China stops overinvesting and balances its economy, the global economy would receive a huge positive boost. The resulting virtuous cycle would sharply decrease the negative sentiment towards globalisation. Read more…

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