China must deliver the kick up the butt the G-20 so badly needs

Kishore Mahbubani, freed from the strait jacket of diplomatic protocol after serving 33 years in Singapore's foreign service, doesn't mince his words now.

"The G-20 process is stalling and needs a big kick in the butt," Mahbubani wrote in a pre-summit opinion piece for the Berggruen Institute's Insights publication. "China should deliver it."

China's President Xi Jinping delivers his closing statement for the G-20 Summit in Hangzhou on September 5, 2016.
Johannes Eisele | AFP | Getty Images
China's President Xi Jinping delivers his closing statement for the G-20 Summit in Hangzhou on September 5, 2016.

Judging by the tenor of Chinese President Xi Jinping's opening remarks urging leaders to "avoid empty talk," Beijing appears committed to re-invigorate a global summit that's been ridiculed as a monumental talking shop that produces little more than motherhood-and-apple-pie statements and photo opportunities.

But can the Chinese leadership re-invent the G-20 under their watch and make it relevant, when its members are pulling in different directions?

"Every host wants their leaders summit to be seen as a success. China will be no different," HSBC's Paul Mackel told me prior to the event. "The question is whether they or others can pull a rabbit out of the hat to convince everyone."

So, as the G-20 discusses structural reforms, there's also pressure on Beijing to step up its own deregulation efforts, as UBS's Wayne Gordon points out: "Clear commitments from China will be needed to make this a success … Timeframes to deepen financial reform and capital account opening. If they squib this, then it will be a non-event."

Part of the problem, though, is the G-20 mandate or lack of a clear one. It can trot out as many resolutions and recommendations as it wants but has done a pretty poor job in following up on them, as NAB's Ray Attrill reminded me.

"Remember the Brisbane G-20 2 percent extra growth initiative?" he pointed out. "No? The G-20 leaders don't either."

The G-20 stands at a crossroads. Short-term pressures are off. They can stand down the fire hoses for now at least. That ought to give G-20 leaders sufficient room to plan for the numerous medium to long-term challenges - the need for "fiscal activism" and structural economic reform.

Asia has shown the way. India, Indonesia and the Philippines are knuckling down to the hard task of reforms. It's not all hunky-dory in the world of emerging markets but financial markets clearly see the momentum there and are rewarding them for it. Elsewhere, it's a harder sell, particularly in Europe.

Former U.S. Vice President Al Gore famously derided the G-20 as "clothes without an emperor" – an allusion to the rather stilted group photo of besuited leaders who so often failed to act on their pledges.

China needs to inject some vigour into the G-20 process. This is Beijing's show. It's high time to find the emperor to fit the clothes.

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