Economic trends

What to expect from the G20

Expect China to promote its growth potential and address financial market risk concerns as it hosts its first G20 summit

All eyes will be on China on 4-5 September, as around 30 world leaders descend in Hangzhou for the 2016 G20 summit.

As a first-time host, this is China’s chance to showcase its growth potential and mitigate concerns about its financial-market risks.

More specifically, we think China will:

  • Elaborate on how their proactive fiscal policies and accommodative monetary policies will help avoid an economic hard-landing in the country
  • Focus on how its leaders will advance supply-side structural reforms to transition the economy to a more sustainable growth path
  • Reiterate its determination to maintain a roughly stable renminbi exchange rate against a basket of currencies and to carry out promised reforms in capital account management and the exchange rate policy, to address global financial markets concerns
  • Elaborate on how it will cope with financial-market vulnerabilities and improve the soundness of its financial system, as China’s rising leverage and non-performing loans have become a big concern for international financial markets

Away from Chinese reforms, with the global economy continuing to face significant downside pressure and global financial risks remaining high, G20 leaders are expected to help contain financial volatility by committing to improving monetary policy coordination among major economies, through measures such as strengthening exchange-rate policies collaboration and reiterating that their central banks will not engage in competitive devaluation.

Supporting developing economies

When it comes to helping developing economies grow sustainably – thereby helping global growth – we anticipate leaders will focus on measures to advance structural reforms, support more infrastructure construction, and encourage the reduction of excess capacity in some traditional industries.

Good news for SMEs

Pledges from this latest G20 meeting could spell good news for small and medium-sized enterprises (SMEs) around the world as leaders are expected to give detailed plans to promote a more inclusive financial system, allowing SMEs to access financial resources at relatively low costs.

Green economy going global

Last but not least, pledges to promote ‘green finance’ will be a key part of the G20 agenda. A concept that China first introduced to the G20 members at earlier minister-level meetings, green finance, such as green bonds and favourable financial arrangements for environmentally friendly projects, is key to the rise of green industries, not just in China but across the world. A report detailing how the concept could help sustainable growth globally will be issued at the summit, and we think it will mark the start of making the ‘green economy’ a global concept.

 

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