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Editorial: G8 and China

Published by The Straits Times, Singapore on 2004-06-14

The summit of the grouping of industrialised nations known as G8 that ended Thursday in the American resort of Sea Island came up with little more than boilerplate pablum about global peace and security. It was really a host-driven meeting about the deteriorating situation in Iraq, where the United States finds itself in a calamitous situation, losing young soldiers almost daily to attacks by insurgents unwilling to accept the presence of foreign troops. U.S. President George W. Bush failed to convince fellow G8 leaders that the American military contingent should be complemented or replaced by troops from NATO countries. He shot down a British proposal to cancel the staggering US$1.6 trillion external debt of developing countries, mainly to Western donor nations. Only polite lip service was paid to alleviating the economic and social plight of poor countries, including those in Africa. And during their meeting, greeting and eating in sun-splashed Sea Island, none of the G8 leaders said anything of consequence about a guest who should have been invited to the feast, China.

In fact, if economic size matters in modern geopolitics - and unquestionably it does - then China belongs to the G8 grouping ahead of members like Canada and Russia, both of whom have substantially smaller economies. So does India, whose purchasing-power GDP of US$3.5 trillion (correct) makes it the world's fourth biggest economy, behind the U.S., China and the European Union. But neither country was asked to attend - and no wonder. The G8 is, in effect, a supercabinet, a conclave for setting the agenda for global governance, a body that internationally known economist Mr Prem Shankar Jha of India calls, somewhat unkindly, "a rich white man's club, plus Japan." Long dominated by the U.S. since its creation - as G7 - in 1973 to stabilize international interest rates after then U.S. President Richard M. Nixon delinked the American dollar from the gold standard, the G8 has had ample opportunities at its 33 previous meetings to create conditions for a more equitable world economy. But in the post-Cold War period since 1991, the G8 has been an almost entirely political body, with Third World issues discussed mostly as an afterthought.

That's lamentable, especially given how G8's own finance ministers - who band under the separate grouping of G7, or G8 minus Russia - are concerned about bringing China to the table on issues such as its stated goal of depegging the yuan from the U.S. dollar (the fixed exchange rate is US1=8.28 yuan). China has said it wants to move toward a looser monetary system under which the yuan would be linked to a basket of currencies, and not just the U.S. dollar. Such a move could help cut the huge U.S. deficit, among other things, helping the dollar recover strength. But the dollar issue is no longer as hot an issue for the G7 ministers as it was in 2003 - since there's been substantial recovery of the American currency anyway - and so an invitation by G7 to the Chinese to explore the matter has been slow in arriving. Perhaps when the ministers meet in October, they will find the wisdom to ask China to join their proceedings.

That would be wise also because China and the U.S. are the two main engines of global economic growth today, with China's economy barreling ahead at an astonishing 10 percent annually, its exports doubling every five years, and its manufacturing and construction sectors consuming 30 percent of the world's steel products. Such growth has spawned wide concern that the Chinese economy could come in for a "hard landing" - plainly put, that would mean a crash. China therefore needs to be better integrated into the global economy in order to enhance its responsibilities to the international community since China's induction into the World Trade Organisation in December 2001. Participating in G7 meetings would be a good first step. Being invited to next year's G8 meeting in Britain would be even better.

Pranay Gupte,
Senior Writer and Global-Affairs Columnist

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