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Turning rhetoric into action to boost global economic growth
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IN 2008, when the world was mired in the aftermath of the global financial crisis, leaders of the 20 major economies came together to figure out ways to get back on their feet.
Fast forward eight years, leaders of these economies met again in Hangzhou, a scenic Chinese city, and were joined by those from many developing economies to address stalling economic growth. The world may not look as perilous as it was eight years ago, but it is equally, if not more, in need of a solution.
Global economic growth has yet to recover to pre-crisis levels, hovering for years at around 3 percent. Trade, one of the key growth drivers, came in even lower during this period.
The Group of 20 has proved instrumental in orchestrating efforts to help the world weather the crisis, but its relevance will be called into question unless leaders come up with forceful measures and implement them.
In his address to the opening ceremony of the summit on Sunday, Chinese President Xi Jinping said that the G20 should be an “action team” rather than a “talk shop”, and he urged participating countries to ensure implementation of action plans on sustainable development, green finance, energy efficiency and combating corruption.
It is not just the crisis that requires an urgent solution, many structural woes also require immediate and practical solutions as monetary easing has only exacerbated them. At a time when these problems threaten to stamp out a fragile and patchy recovery, countries are tempted to seek easy remedies, such as protectionism and competitive currency devaluation, instead of tackling structural woes head on.
Structural reform
As the host of this year’s G20 summit, China knows all too well about the consequence of delaying structural reform. The country is still nursing the hangover of the massive stimulus it launched in the wake of the global financial crisis, including rising debt loads for local governments and private firms, and overcapacity in many sectors.
Recognizing the urgency of addressing these problems that threaten to bring a once turbo-charged economy to a grinding halt, structural reform tackling overcapacity and debt — not to mention changes to the financial system itself — will channel credit to where it is needed.
Central bank governors and finance ministers have repeatedly said that monetary easing alone cannot generate sustainable growth and G20 has called for combining monetary easing with fiscal and structural reform.
For many economies, undertaking such reforms is no easy task. Xi said China’s reform has entered a “deep water zone”, where tough challenges must be met and many of the adjustments to tackle problems amassed over the past years will be “painful.”
Still, Xi told a group of countries hoping to walk away from the two-day summit with actionable measures that China has taken the most robust and solid measures and will “honor our commitment with action.”
That is a promise G20 leaders will take to their heart and a timely reminder from the host to turn rhetoric into action and make a real difference in how countries, both developed and developing, grow their economy in the future.
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