Commentary: Revamping global economic governance in due course

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by Xinhua writer Liu Jie

HANGZHOU,   (Xinhua) — When the Group of 20 (G20) leaders gather in China seeking a remedy for sluggish global economic growth, something equally consequential will also be on the table: revamping global economic governance.

While the global economy remains mired in prolonged weakness, advanced economies, intoxicated by “helicopter money” and saddled with secular slow growth and structural problems, are less able than they used to be to act as the world’s economic engine.

On the other hand, emerging economies have shown strength and resilience. Based on data collected by the International Monetary Fund (IMF), Chinese economists found that emerging and developing economies contributed 80.2 percent of global growth annually on average from 2008 to 2015, higher than the 40 percent registered from 2000 to 2007.

In the next five years, their contribution to the world economic growth will ease to 57 percent, but the figure is still more significant than the developed economies.

The changes to the global economic landscape have been too great, while the changes to the global governance framework have been too small.

Since the existing global economic governance architecture was designed by the United States, the world’s sole superpower, developing economies are traditionally underrepresented in global economic governance.

This year saw a crucial step forward for global economic governance reform, as IMF quota reform to give emerging markets a bigger say took effect after the United States cleared domestic legislative barriers.

The reform elevated China from sixth to third largest shareholder in the fund. Other emerging markets such as India, Russia and Brazil also gained more shares.

The change was hard won, given the obstinacy and tardiness of the U.S. Congress in responding to the evolving global environment. However, the current structure fails to mirror the global economic status. Reforms of major global multilateral agencies are far from complete.

The views and voices of developing nations should be heard more regularly. The voting shares of developing economies should be increased in proportion to their shares of global growth.

Allowing emerging economies bigger voices is indispensable for a fairer and more reasonable global governance system. More importantly, equal opportunities in global cooperation in terms of rights and rules will allow emerging markets to release more potential and boost their productivity.

Rome was not built in a day. It is unrealistic to expect the old governance architecture to be fixed quickly.

Recognizing the shortcomings of the existing system, China, alongside other developed and developing countries, has launched new multilateral development agencies such as the Asian Infrastructure Investment Bank (AIIB).

The AIIB aims to complement, rather than challenge, the existing system. Its inaugural president, Jin Liqun, has compared it to opening a new restaurant on the same street to meet huge additional demands.

With the IMF, World Bank, Asian Development Bank, AIIB and other multilateral development agencies working independently while also in close connection to one another, global economic governance is evolving, being revamped and reshaped.

With a record high number of representatives from developing nations invited to the G20 summit in Hangzhou, the summit could offer the most developing country representativeness in G20 history.

The G20 mechanism is shifting from coping with crisis to long-term governance. Members should take on the historic opportunity in Hangzhou to revamp global governance in due course.