Source: China.org.cn    Published: 2016-9-2

The Group of 20 (G20) leaders` summit taking place in Hangzhou Sept. 4-5 will be essential in building a consensus on the international financial system, according to experts giving their views ahead of the meeting.

Meeting for the first time in China, the 20 state leaders are due to talk about global economic and financial issues during the two-day summit.

Its timing this year comes at a "critical point," said Tan Yaling, president of China`s Forex Investment Research Institute (CFIRI). "The future of the global economy remains uncertain, being capable of embarking on a better trajectory or a worse one; hence the summit needs to promote a more stable economy."

It is also important for the current international financial market, said Tan, citing the currency depreciations of various countries and the uncertainty over whether the U.S. Federal Reserve will decided on an interest rate hike, posing greater risks for the global financial market. Thus, the G20 summit is important in providing an opportunity to discuss coordination of the monetary policies by the world`s major economies, she said.

China has set "more effective and efficient global economic and financial governance" as one of the topics of the summit. Commenting on the agenda, Chen Chenchen, a researcher with the Chongyang Institute for Financial Studies of Renmin University, pointed out that the G20 forum was first launched in the wake of the 2008 global financial crisis.

The summit this year maintains this agenda, while highlighting the focus on global economic and financial governance and the transformation of the forum from a crisis-response mechanism to long-term governance, she said.

China is now assuming an important role in promoting globalization, which was previously championed by the U.S. and Europe, Chen said, adding that they seemed to have lost interest in that role and, in fact, tend towards protectionism, regionalism and anti-globalization.

Reforming international financial system

Reform of the world`s key financial institutions has been on the table for years, but no significant progress has been made, experts say. This year`s summit will again consider the topic, however.

The International Monetary Fund, serving as the world`s leading financial organization, launched a drive for governance reform back in 2010. One important step was the doubling of total quotas, which led to a redistribution of quota shares and a six percent increase in total share ownership among emerging markets and developing countries -- in effect giving them a larger say in the IMF.

However, the reform was only ratified by the U.S. late last year, with the country`s share dropping merely 0.25 percentage points, and still retaining its veto power, which was far from meeting expectations.

China has taken the initiative in recent years to improve the existing global financial system, said Chen of the Chongyang Institute. It proposed establishment of the Asian Infrastructure Investment Bank and the BRICS-oriented New Development Bank, in an effort to enable emerging economies and developing countries to have more say in international financial matters, Chen noted.

But Tan of CFIRI said the voice and representation of such countries in the existing global financial system was largely dictated by their domestic economic prowess; hence, they had to further develop their own economies in order to be better represented in discussions on international financial matters.

It was more urgent for the emerging countries to handle their domestic economic problems, especially when they are suffering various problems now, she added.

Consensus-building

Both speakers acknowledged that the statements and consensus to be reached in the G20 summit would not be binding or enforceable; however they insisted that the summit would still be significant in helping countries reach consensus and push the discussions on the global economy and finance issues back on track.

Countries in the past are accustomed to developing on their own, often resulting in negative spillover effects, but the Hangzhou meeting would enhance consensus-building among the world`s major economies, Chen said.

She took the monetary policy of the U.S. as an example of how its changes and uncertainties could jeopardize the financial markets and the domestic economy of other countries as a whole. If a unified policy and consensus could be reached, it would create more momentum for the world economy.

The upcoming meeting will leave a "footprint" in the history of the G20 as being an efficient mechanism dealing with economic problems facing the world, Chen said.