G20 moot reflects shift in global economic balance
Foreign Desk Report

XIANGHE (China)—International financial bodies need to reflect the impact emerging powers are having on the global economic landscape, finance chiefs said at a weekend meeting hosted by China. The Group of 20 also warned of high oil prices, trade barriers and economic imbalances — all key issues involving energy-hungry China, the world’s fastest growing major economy that is running a huge trade surplus with the West.
The finance ministers and central bank chiefs meeting outside Beijing also agreed on a “roadmap” to reform the International Monetary Fund (IMF) and World Bank, to give more say to booming newcomers from Asia and elsewhere. The G20 was founded in 1999 to enhance dialogue between the Group of Seven industrialised nations and population giants such as China, India and Brazil as well as other key economies, including oil-rich Saudi Arabia and Russia.
The grouping is now considered an informal forum for debate but organisers point out that its members account for two thirds of the world population, 80 percent of its trade and 90 percent of global economic output. “So far the G20 is still a talk shop and no major decisions have been made,” said Andy Xie, Morgan Stanley’s Asia Pacific chief economist. “But I think eventually the G20 could replace the G7 in importance. The biggest problems in the world relate to the diverging interests between big developing and developed countries”.
In the long run, he said, economic issues should be discussed between six key players: the largest economies, the United States, European Union and Japan, and the largest developing countries — China, India and Russia. The G20 responded to criticism that world financial bodies such as the Bretton Woods Institutions (BWIs) — the IMF and World Bank — still reflect the economic power balance of the time they were founded over 60 years ago.
“The world economy has evolved considerably since the founding of the BWIs, with fast growth in many emerging markets and deepened integration in industrialized countries,” they said in a final statement. “We reaffirm the principle that the governance structure of the BWIs — both quotas and representation — should reflect such changes in economic weight.” Australian Treasurer Peter Costello, who will chair next year’s G20 meeting in Melbourne, said there had been a “recognition that, as the world economy has changed, so too these organisations must change”.