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Hangzhou consensus and its significance for the global economy: summary of the G20 summit (September 4-5, 2016)

A few days ago G20 summit in Hangzhou (China) completed its work. Its main theme was – “Construction of innovative, healthy, coherent and inclusive global economy”. It is time now to evaluate the results of this important international forum. I will focus only on some of the most pressing moments.

First, the G20 summit participants has noted that the global economy is experiencing a period of recovery, but the level of economic growth is still below desired. Downside risks still remain due to potential volatility in financial markets, commodity price fluctuations, slow pace of trade and investment growth, and also weak growth of labor markets in particular countries. Prospects for global economic growth are also complicated by geopolitical events, the increase in flow of refugees, terrorism and international conflicts.

Second, the G20 countries has adopted a set of measures called “Hangzhou consensus”, which includes four basic criteria: vision, integration, openness and inclusiveness. The G20 countries have stated that they are willing to use all leverages of economic policy – monetary, fiscal, structural – at both the national level and international to achieve a common goal – to ensure strong, sustainable and balanced growth of the world economy.

Third, the forum participants have extended the validity of their obligations not to use new and to reduce existing protectionist measures in trade and investment until 2018 and promised to support the work of WTO, UNCTAD and OECD in the monitoring of protectionism.

Analysts of “Voice of America” rightly noted that in this regard the West took a step towards China, whose economy has been seriously affected by the protectionist measures taken by Western countries.

Fourth, the participants of the G20 summit said: “We also recognize that subsidies and other forms of support from the state or state-funded institutions can lead to a breach of market processes and contribute to the emergence of excess production capacities at a global level and, therefore, need to be addressed”. Perhaps the position of this final communiqué reflected concern of the West on measures in subsidizing certain sectors of the economy in some developing countries.

Fifth, the “Big Twenty” countries also confirmed their commitment regarding the exchange rates, including the refusal of competitive devaluation of national currencies and non-focus policy on targeting exchange rates in order to increase competitiveness.

Sixth, in the context of the transformation of the international financial architecture, it is especially important that members of the “twenty” agreed to continue the reform of the International Monetary Fund (IMF) and the World Bank, giving more influence to developing countries. Certainly, this point of the final communiqué reflected the mood and demands of China, Russia and other members of the BRICS.

Seventh, the G20 countries also agreed to enhance the transparency of energy markets in order for them to better reflect the changing realities of the global energy landscape, creating an affordable, reliable and sustainable energy future with low greenhouse gas emissions from the use of energy resources and technologies.

Eighth, the summit participants adopted a plan to counter corruption in the 2017-2018 and called all G20 members to ratify the UN anti-corruption convention. The leaders of the “twenty” expressed their support for the principles of assistance in the field of tracing corrupt officials and recovery of assets, and supported the idea of creating a scientific center in China for the study of this issue.

In general, the G20 Summit in Hangzhou has played an extremely important and positive role. Despite the continuing contradictions and disagreements, the leaders of major countries of the world have managed to reach mutually acceptable compromises on many issues of the global economy. Of course, the economic effect of the implementation of the decisions adopted at the summit will not manifest itself immediately, but only after several years. Nevertheless, “Hangzhou consensus” has become a landmark event and an essential part of the history of the “Big Twenty”.