The G8 should start opening to China
ByLine: Matthew Goodman
On Sea Island off the Georgia coast, leaders of the Group of Eight leading industrial countries will sit down next
week for their annual summit on global concerns from managing the international economy to fighting terrorism. Like
Banquo at Macbeth's feast, the spirit of one absent guest will hover over the proceedings: China.
China has become simply too big to ignore. Its economy is now the sixth largest in the world - larger than that of
two existing G8 members, Canada and Russia. The giant sucking sound in the global commodity markets today represents
China's voracious consumption of raw materials to feed its feverish growth. But China's growing role as a
driver of global demand has also created new sources of anxiety for G8 policymakers. There are now clear signs of
overheating in the Chinese economy, fuelled by uncontrolled bank lending and over-investment. Global financial markets
have been upset in recent weeks by fears that China could be headed for a hard landing.
While aware of these macroeconomic risks, Washington has been preoccupied with other challenges posed by China's
emergence. Large and growing bilateral trade deficits and widespread concern about job losses to China are fuelling US
protectionist pressures. The Bush administration has so far managed these pressures well. It has held Beijing
accountable for fully implementing the commitments it made on joining the World Trade Organisation in December 2001,
while resisting most domestic calls to limit China's access to the US market.
The Sea Island summit presents an opportunity to address the broader challenges of a rising China. By beginning to
shape a role for China in the G8's deliberations on global economic management, several objectives could be
advanced. Bringing China into the tent would give Beijing a greater stake in the good functioning of the global economy
and help shape its macroeconomic, trade and other policies. Inclusion of a leading developing nation would also give the
G8 more authority on crucial global issues. Moreover, China's involvement in the G8 would be consistent with a
broader strategy pursued by various US administrations over three decades: integrating China into the global rules-based
system. A centrepiece of this strategy was bringing the country into the WTO, which bound China into the international
system of trade rules and reinforced the dynamics of domestic economic reform.
But WTO accession can no longer be the main driver of China's integration into the global rules-based system.
The Chinese greyhound needs another rabbit to chase if it is to continue moving toward western norms and practices in
trade and economics, and ultimately in the political and social arenas. The prospect of eventual G8 membership could be
that new rabbit.
But is a country with China's human rights record and incomplete state of development worthy of membership of a
club notionally designed for industrialised democracies? This is a valid concern - and one that could equally apply to
Russia. Until it acts more like an advanced democracy, China does not deserve the public relations victory of an
invitation to Sea Island - let alone full G8 membership.
Instead, China's gradual integration into the group should be geared to demonstrations of Beijing's
willingness to assume the responsibilities of global leadership. The first step should be to invite China's top
financial officials to join the economic core of the G8: the G7 finance ministers forum (the G8 minus Russia). The US
Treasury secretary should invite his Chinese finance ministry and central bank counterparts to attend the next G7
meeting in October. Meanwhile, working with next year's G8 host, Britain, the Bush administration should use Sea
Island to propose that China be offered the prospect of an invitation to the 2005 summit - the economic sessions - if it
meets policy benchmarks such as implementing WTO commitments or introducing a more flexible exchange rate.
Critics say the G8 is an anachronism in a globalised economy with competing centres of economic power. But the group
still has important roles, including to force big economies periodically to justify their policies before their peers
and attempt to co-ordinate policies at times of global dislocation. The opportunities and challenges posed by
China's emergence represent the most powerful dislocation in the international economy today. It is time for the G8
to open its eyes - and doors - to this new reality.
The writer was director for Asian Economic Affairs at the National Security Council 2002-2004 and is now
vice-president of Stonebridge International
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