By Christopher Anstey and Christopher Condon
The most important takeaway from next week’s gathering of finance chiefs from the world’s biggest developed and emerging economies won’t be on the official agenda: who’s gaining in the battle for global influence between the US and its allies on one side and China and Russia on the other.
Group of 20 finance ministers and central bank governors convene in Gandhinagar, the capital of Prime Minister Narendra Modi’s home state Gujarat, in coming days, with key meetings set for July 17-18. Policymakers aim for progress on bolstering the resources of multilateral development banks, encouraging greater flows of credit to limit climate change and executing on a global corporate-tax deal that’s proven tough to finish.
Several top officials, including the German and UK finance heads and European Central Bank President Christine Lagarde, are expected to skip the meeting — which is sandwiched between last month’s global finance summit in Paris and the G-20 leaders’ conclave in September — a move that will lend importance to Treasury Secretary Janet Yellen’s attendance. She’ll be making her third visit to India in nine months, amid a concerted US push to strengthen ties with China’s giant neighbor.
India, the rotating head of the G-20 this year, was unable at the last finance meeting in April to secure either a joint statement or even a chair’s statement of summary, underscoring deep divisions in a group that includes Russia. In February, the chair’s statement had reiterated G-20 language from last year pointing out that Russia’s invasion of Ukraine had led to a United Nations vote of condemnation.
But things have evolved: Yellen has just re-established high-level economic engagement with China, and Modi recently delivered an historic second address to the US Congress, with a Bastille Day-welcome in Paris looming for him on Friday. Russia, meantime, saw internal dissent on public display last month with the Wagner Group incident.
“Whether China is going to shift” its stance on G-20 statement language with regard to Russia will be key to watch, said John Kirton, director for the G-20 Research Group at the University of Toronto. “Maybe Russia just has less influence in vetoing all of the problematic passages.”
The G-20 members have also been deadlocked on debt relief for developing nations, after conceiving a coordinated plan known as the Common Framework in 2020. While the US and allies have pressed China, by far the largest official creditor to poorer countries, to step up, Beijing has urged multilateral lenders such as the World bank to participate in taking haircuts.
China, represented by Premier Li Qiang, helped the French hosts make the Paris financial summit a success by participating in a long-awaited agreement in principle to restructure Zambia’s debt. No such breakthroughs are anticipated in the coming days, in part thanks to the absence of the highly indebted nations needing relief, but further discussion alone may be a good sign.
Debt Relief
“We still are in this world where the Common Framework is not living up to its potential, but it is making progress,” said Stephanie Segal, senior fellow at the Center for Strategic & International Studies.
Another issue to monitor for progress will be talks to overhaul the World Bank and other large multilateral lenders. Yellen has been among those pressing for those banks to work harder to incentivise private capital flows toward developing nations. She’s also urged them to take a bigger role in combating climate change.
The US estimates that these lenders — as a system — could unlock as much as $200 billion over the next 10 years by implementing change, a senior Treasury official said Thursday.
Divisions have emerged over the extent to which aid to the poorest nations, who qualify for so-called concessional financing, ought to be prioritized, risking diminished credit for lower-middle income economies.
The G-20 are also slated to touch base on an initiative to revamp global corporate taxes. While most of the world agreed in 2021 on a two-pillar deal to end a so-called race to the bottom on business levies, getting it finalised has been a challenge.
“It’s a very crowded agenda,” and it’s unlikely there’ll be major developments on any particular front, Segal said.
Ahead of the full G-20, the Group of Seven industrialised nations meets on Sunday, where the finance chiefs are expected to focus on support for Ukraine, the reform of multilateral development banks and the G-7’s push to recalibrate global supply chains. Boosting support for Ukraine is also on the agenda.
Gandhinagar will be the debut outing to a G-20 finance chiefs gathering for newly installed World Bank President Ajay Banga. It also offers Turkish Finance Minister Mehmet Simsek and central bank Governor Hafize Gaye Erkan the opportunity to attend for the first time since President Recep Tayyip Erdogan unveiled his post-election economic team.
Finance ministries and central banks not sending their principal policymakers typically are represented by other senior officials.
For Yellen, the trip offers another chance to deepen ties with India, a location she’s singled out for “friend-shoring” supply chains. A senior Treasury official said the India relationship was one of the three reasons for Yellen’s attendance at Gandhinagar, alongside multilateral development bank reform and debt relief.
The G-20 was set up in the wake of the Asian financial crisis in the late 1990s, and was hailed during the global financial meltdown in 2008 for helping to limit the damage of that economic disaster. In more recent years, a slew of alternative groupings has gained attention, including the BRICS forum for Brazil, Russia, India, China and South Africa, which is scheduled for a summit next month.
“The Biden administration has used these forums to reinforce and demonstrate the power of unity of like-minded countries — developed economies/democracies — to continue assert the US views and influence,” said Philippe Dauba-Pantanacce, an economist and global geopolitical strategist at Standard Chartered Plc in Paris, of the G-20. “There is a competition on who will influence the next global order, and how.”