The G20 Summit and the Rise and Fall of G2 Power

The G20 Summit and the Rise and Fall of G2 Power
China Times editorial (Taipei, Taiwan, ROC)
A Translation
November 16, 2010

On the 12th of this month, under the dark cloud of a currency war, the Group of Twenty (G20) Summit adjourned its meeting in Seoul, South Korea. In the end, summit leaders issued a vaguely worded statement. They agreed to adopt a more market-oriented exchange rate system in order to avoid a currency war and trade protectionism. Discussion of the specifics were postponed until next year. The vague statement is unlikely to resolve tensions between the major currencies, or improve global economic imbalances. It also reflects the rise of Mainland China, and the decline of US power.

The Group of Twenty is comprised of the world's 19 largest economies, plus the European Union. Following the outbreak of the financial tsunami, leaders of the G20 met in Washington for the first time, seeking a way to resolve the financial crisis. The G20 has replaced the original G8, and become a major global economic forum. During the financial crisis, national leaders experienced a heightened sense of crisis. They were willing to work together to resolve difficulties. As a result last year's summit in London arrived at a number of specific agreements designed to prevent the global economy from falling into a Great Depression. The Seoul summit was the fifth Leadership Conference held since the outbreak of the financial crisis. As each of the nations moves towards recovery, selfish considerations have paradoxically made concrete agreements more difficult. Steven Harper, Prime Minister of Canada, said bluntly that the summit failed to address any critical problems.

This time the leaders of both Mainland China and the US confronted each other over exchange rates. This became the focus of the summit. President Barack Obama once again applied pressure on the RMB exchange rate, but failed to elicit an explicit response. Mainland President Hu Jintao stressed that the Mainland would adopt gradual exchange rate reform. He also criticized U.S. Federal Reserve monetary policy for its second wave of quantitative easing. This actually made for a weaker dollar and triggered the large scale entry of hot money into emerging markets. He called on the United States as a major reserve currency economy to adopt a responsible monetary policy, and to consider the interests of emerging economies. Also, the United States had previously proposed a quantitative indicator to avoid competition over currency devaluation. It had proposed limiting the GDP current account surplus or deficit to approximately four percent. In the end this motion came to nothing due to opposition from Mainland China and Germany.

During Barak Obama's recent ten-day Asian trip, the main theme was economic and trade issues. But it ran aground during negotiations on the RMB exchange rate issue and the bilateral US-South Korea Free Trade Agreement. This suggests that U.S. influence in the international arena is gradually weakening. The Wall Street Journal noted that Obama's setback in Seoul was due mainly to the weak U.S. economic recovery and the defeat of the Democratic Party in the midterm elections. This weakened the United States as a global economic leader. The New York Times noted that the compromise-filled "Seoul Declaration" reflects the rise of Mainland Chinese influence.

This year for the first time, Mainland China's economy surpassed Japan's. It has now become the world's second largest economy. It is not merely the world's largest factory. It is also the world's largest market. According to statistics, last year it accounted for nearly half the world's consumption of coal, zinc, and aluminum. It consumes twice as much iron and steel as the US, the European Union, and Japan combined. China is also the world's largest automotive and mobile phone market.

According to the International Monetary Fund, Mainland China will account for one-fifth of the world's economic growth this year. During the financial crisis, the U.S. entered an economic recession. Mainland China on the other hand, maintained its growth. Although Mainland China still cannot replace the United States, the fact that the United States failed to make a breakthrough on trade issues during the G20 summit underscores Mainland China's growing international influence.

The Fed's quantitative easing has become everyone's favorite target. This has weakened the United States' demands for RMB appreciation. Even host nation South Korea expressed concern. This is one reason US-South Korea free trade negotiations failed to reach any agreement. The International Monetary Fund has long opposed capital controls. Now however, it favors capital controls for emerging countries, when necessary. The "Seoul Declaration" in particular, hinted that emerging nations could adopt prudent capital controls measures to avoid exchange rate volatility caused by hot money. This endorsement handed emerging nations their most powerful weapon in their fight against hot money. It also showed how intense dissatisfaction was among emerging nations for the United States' policy of quantitative easing.

Obama declared the Seoul summit a success. But U.S. economic power is undeniably waning in the wake of the financial crisis. This was the reason for the setbacks Obama suffered. On the other hand, on international economic and trade issues, Mainland China's voice is increasingly influential. Without Mainland China's cooperation it is difficult to reach a consensus. As we monitor the rise of Mainland China and the decline of U.S. power, we realize that power is never permanent. Nations will cooperate. They will also compete and conflict. Within the fabric of the international trade system, if one wishes to become a major power, one can do so only through overwhelming economic strength.

從G20峰會 看G2勢力消長
2010-11-16 中國時報

在貨幣戰爭陰影籠罩下，二十國集團（Ｇ20）高峰會十二日於南韓首都首爾閉幕，與會領袖最後發表了措辭模糊的聲明，同意將採取更市場導向的匯率制度，避免貨幣競貶與貿易保護主義，不過，具體作法與細節則延後至明年再行討論。這項流於空泛的聲明，不僅難以有效化解主要貨幣間的緊張關係並改善全球經貿失衡問題，另一方面也反映出中美兩國勢力的消長。

二十國集團是由全球最大的十九個經濟體加上歐盟共同組成，金融海嘯爆發之後，二十國集團領袖首度在華盛頓集會，共謀解決金融危機之道，如今Ｇ20取代了原先的Ｇ８，成為全球主要經濟論壇。金融海嘯期間，各國領袖有極高的危機意識，願意共體時艱，因此在去年的倫敦峰會達成多項具體共識，讓全球經濟避免陷入大蕭條；這次首爾峰會是金融海嘯爆發以來第五次領袖會議，各國邁向復甦之際，基於本位主義考量，反而較難達成具體共識。加拿大總理賀博坦言：「這次峰會並沒有解決關鍵性的問題。」

這次中美兩國領袖就匯率議題針鋒相對，成為主要焦點。美國總統歐巴馬再次對人民幣匯率施壓，未獲得具體回應。中國國家主席胡錦濤強調，將採取漸進式的匯率改革，並反批美國聯準會推出第二次量化寬鬆貨幣政策，實際上是讓美元走貶且引發大量熱錢湧入新興市場，他呼籲美國做為主要儲備貨幣發行經濟體應採行負責任的貨幣政策，同時考量新興經濟體的利益。此外，美國先前曾提出一項避免貨幣競貶的量化指標，擬將經常帳順差或逆差限制在ＧＤＰ的四％範圍內，不過，這項議案因中國、德國反對，最後不了了之。

歐巴馬這次為期十天的亞洲行，經貿議題是主軸，但這次從人民幣匯率議題未有交集到美韓自由貿易協定雙邊談判觸礁，似乎顯示美國在國際舞台的影響力逐漸減弱。《華爾街日報》指出，歐巴馬的首爾行受挫，主要因為美國經濟復甦力道薄弱且民主黨在期中選舉大敗，削弱了美國做為全球經濟龍頭的權威。《紐約時報》則指出，這次充滿妥協的《首爾宣言》，反映出中國影響力的上升。

今年中國的經濟規模首度超越日本，成為全球第二大經濟體，她不僅是全球最大工廠，也是最大的市場。據統計，中國在去年消耗了全球近半數的煤、鋅和鋁，她所消耗的鋼鐵是歐盟、美國與日本等國加總的二倍；中國同時是全球最大汽車、手機市場。

國際貨幣基金統計，今年全球的經濟成長有五分之一來自中國的增長。金融海嘯期間，儘管美國經濟衰退，中國仍可維持一定的成長。雖然中國在現階段仍無法取代美國，但從這次二十國集團峰會中，美國在經貿議題上未能達成突破性進展，的確凸顯了中國在國際舞台的影響力與日俱增。

值得注意的是，這次聯準會的量化寬鬆政策幾乎成為眾矢之的，削弱了美國要求人民幣升值的壓力，甚至連峰會主辦國南韓都表示疑慮，也成為美韓自由貿易談判未能達成共識的原因之一。向來反對資本管制的國際貨幣基金，如今轉而支持新興國家必要時可以實施資本管制。此次《首爾宣言》特別暗示，新興國家可以採取審慎的資本管制措施，以避免熱錢造成匯率的劇烈波動。這項聲明的背書，使得新興國家在對抗熱錢時，有了尚方寶劍，也顯示新興國家對美國量化寬鬆政策的強烈不滿。

儘管歐巴馬仍宣稱這次首爾峰會是成功的，然而，不可否認地，金融海嘯之後，美國經濟力逐漸減弱，使得歐巴馬在這次峰會中的多項談判受挫；另方面，在國際經貿議題上，中國的發言權增加，如果未能取得中國的合作，這些議題很難達成共識。從美中勢力的消長看來，沒有永遠的強權，各國彼此間有合作、有競爭，也有衝突；在合縱連橫的國際經貿體系中，要成為強權，也唯有經濟實力才是最堅強的後盾。