After the Asian Financial Crisis 1997-1998, it was acknowledged that the participation of major emerging market countries is needed on discussions on the international financial system, and G7 finance ministers agreed to establish the G20 Finance Ministers and Central Bank Governors meeting in 1999.
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The G20 Finance Ministers and Central Bank Governors meetings were centred on major economic and monetary policy issues among major countries in the global financial system and aimed at promoting cooperation toward achieving stable and sustainable global economic growth for the benefit of all countries. The participating members in the meetings were the same as the current G20 members.
In November 2008, the inaugural G20 Summit was held in Washington DC in response to the global financial crisis that occurred in the wake of the collapse of the Lehman Brothers. The G20 Meeting of Finance Ministers and Central Bank Governors was upgraded to the head of state level, as a forum for leaders from major developed and emerging market countries.
In September 2009, the third summit was held in Pittsburgh where the leaders designated the G20 as the “premier forum for international economic cooperation.” From thereon, the summit meetings were held semi-annually until 2010 and annually from 2011 onwards.
The participants are leaders from 19 countries and the European Union (EU). The 19 countries are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Republic of Korea, Republic of South Africa, Russia, Saudi Arabia, Turkey, United Kingdom and the United States of America. In addition, leaders of invited guest countries and representatives of invited guest international organisations participate in the summit along with leaders from the G20 members.
The G20 Summit is formally known as the “Summit on Financial Markets and the World Economy”. As the “premier forum for international economic cooperation” (agreed by leaders at the Pittsburgh Summit in September 2009), representing more than 80 percent of the global gross domestic product, the G20 has made continuous efforts toward achieving robust global economic growth.
As globalisation progresses and various issues become more intricately intertwined, the recent G20 summits have focused not only on macro economy and trade, but also on a wide range of global issues which have an immense impact on the global economy, such as development, climate change and energy, health, counter-terrorism, as well as migration and refugees. The G20 has sought to realise an inclusive and sustainable world through its contributions towards resolving these global issues.
The host country of the G20 summit leads the group over the course of one year from December through the following November as the G20 presidency. The G20 presidency also organises relevant ministerial and working group meetings.
It is the first time for Japan to take on the G20 presidency. The G20 Osaka Summit will be held on June 28-29, as well as relevant ministerial meetings in eight cities in 2019.
What can we expect from this G20 summit this year is hard to predict with the US-China trade war going on and the meeting between Trump and Xi expected to take place on the sidelines of the annual summit.
In the meantime, “Chinese growth is likely to derail further by the ongoing trade war … [it] … is expected to slow down. It would need to see a devaluation of the yuan to help boost the economy,” said Bruce Yam, forex strategist at Hong Kong broker Everbright Sun Hung Kai.
He said he expected the yuan to devalue beyond seven to the US dollar in the coming months, hovering in the range of 6.68 yuan to 7.15 yuan in the medium-term. State-owned Chinese lender Bank of Communications International and Swiss bank UBS too have forecast the Chinese currency to devalue beyond seven yuan per US dollar in the next three months.
“Generally speaking, the depreciation of the yuan will benefit sectors such as exporters and mining explorers, since the depreciation will help them reduce export costs or exploring costs,” said Kenny Ng, securities strategist at Everbright Sun Hung Kai.
The onshore yuan – traded in mainland China – changed hands for about 6.9354 yuan to the US dollar recently, down 8.2 percent over the past year while its offshore counterpart was down 8.6 percent at 6.9281 yuan in the same period, a hair’s breadth away from the rate of seven yuan to the US dollar. The last time the yuan devalued beyond seven was before the global financial crisis in 2008. While mainland exporters benefit from a weakening yuan, they will need to pay higher tariffs if such goods are exported to the US, as the Trump administration has raised tariffs to 25 percent from 10 percent.
We will have to wait for more answers after the G20 summit where solutions would be drawn up.
Benjamin is a business consultant based in China