The G20 is likely to disappoint

Next week, the Chinese city of Hangzhou, situated west of Shanghai on the Yangtze River delta, will host the G20 summit. Hangzhou, which has around 7m inhabitants, has a 2,000-year history and is most recently notable for being the home of Alibaba, the world's biggest online retail and e-commerce company. The city has been prepared with great care for what China regards as an important diplomatic event.

As the political leaders gather, China has at least three objectives. It wants to show the country in a favourable light, befitting the status to which it thinks it is entitled. It wants to avoid publicity about the increasingly contentious disputes over sovereign and maritime rights in the South China Sea. And it wants to take credit for furthering the policy agenda of the G20, including economic, environmental, and regulatory matters. But is China's approach to the G20 what the French call “de trop”?

The G20, which consists of 19 countries plus the European Union, was founded in 1999. Yet the first summit of its members’ leaders did not take place until September 2008, in Washington DC—as it happens, just as the global financial crisis was about to erupt. A year later, the G20 formally replaced the G8. The basic rationale remained the same: to provide a forum for the world's biggest economies to discuss and co-ordinate policies for shared problems. But, with 20 members, the institutional structure is now much more complicated, and the rivalries and conflicting national interests greater.

The G20 is about a lot more than summits—its networks of committees and officials do the less glamorous and painstakingly slow work on governance, agendas, policy options and so on. And only one of its summits has ever been credited with a major achievement: London in April 2009, held as the financial crisis was sending shockwaves around the world. It is said that at this event, the G20 members embarked on a co-ordinated stimulus to save the global economy. In truth, it was more of a marshalling exercise, since most of the major programmes had already been urgently prepared and announced in the latter months of 2008.

The G20 hasn’t lived up to its predecessors the G5 (France, West Germany, Japan, UK and the US) and the G7 (the latter plus Canada and Italy). However, during the 1970s and 1980s, these countries were bound together by Cold War politics, and the need to address accelerating inflation, oil price-induced recessions, and the problems triggered by the collapse of the Bretton Woods system of fixed exchange rates. For many years after 1945, the US was the only country that was willing and able to offer leadership and set an agenda.

For now, the reputation of the US has been tarnished by the financial crisis, and its willingness to provide global leadership is being called into question by many in that country, not least Republican presidential candidate Donald Trump. China aspires to global power but it cannot offer global leadership. The recent disputes in the South China Sea, including the international court ruling in favour of the Philippines, which China did not recognise, demonstrate that the country is still establishing its bona fides in Asia, let alone the world. In today's “multipolar” world, no one is providing global leadership. And without global leadership, G20 summits over the last eight years tend to be grand set-pieces that are long on statements and communiqués, but short on actionable and measurable content.

China's slogan for this summit is “Towards an innovative, invigorated, interconnected, and inclusive world economy.” Who could object? We all want innovation to pick up the baton of growth. China speaks for many emerging markets when it argues that global institutions should better reflect the interests of non-OECD countries. In public, everyone claims that the global trade and investment system is interconnected and needs nurturing. And there is a consensus that the poorest countries of the world need to feel part of it too, and that the UN's Sustainable Development Goals are a worthy cause.

But proclaiming self-evident truths doesn't mean that they are going to happen. And many members are pre-occupied. The US presidential and congressional elections are in November, French presidential and Assembly elections in March 2017, and German parliamentary elections later that year. Italy might have elections too if Matteo Renzi loses his constitutional referendum in November. China is focused on avoiding slowdown in the economy ahead of the all-important (to President Xi Jinping) 19th Party Congress in November 2017.

And the willingness to concede and compromise that is key to deal-making is weak too. Protectionism is a key factor behind the funk in world trade, poor emerging market growth performance, and lower levels of foreign direct investment. According to Global Trade Alert, G20 countries are responsible for most of the over 4,000 measures of restraint introduced since 2009. The current spat over steel is a case in point.

Within the G20, China, Japan, South Korea, Russia, and the Eurozone ran a balance of payments surplus last year of over $1 trillion. That's 4 percent of their GDP, and over 8 per cent in the case of Germany and South Korea. Payments imbalances of this nature are corrosive of global economic and financial stability. But we are no nearer to agreeing how the uber-savers could and would lower their surpluses in the interests of the world economy. And these are just two relatively uncomplicated economic matters, let alone more complex geopolitical spats that are being exacerbated by rising nationalism.

So, as the photo opportunities, communiqués and statements from G20 leaders emerge from Hangzhou, by all means hope for a pleasant surprise and game-changing policy initiatives. Sadly though, the form is not encouraging.