UK economist: G20 goal should be to share global prosperity with workers

Alan Wheatley, associate fellow for international economics at Chatham House. [Photo provided to chinadaily.com.cn]

A Hangzhou charter for fair growth and responsible capitalism would give the G20 Leaders Summit a much-needed sense of purpose, according to an economist with a London think tank. The summit, which is themed "Building an Innovative, Invigorated, Interconnected and Inclusive World Economy", is to be held on Sept 4 and 5 in the eastern city of Hangzhou.

It will see government leaders and central bankers from the world's largest economies meet to exchange views on economic policy.

Alan Wheatley, associate fellow for international economics at Chatham House, said he believes one of the key ingredients to push for a new round of world economic prosperity is to increase the share of global income that goes to workers rather than to companies.

"Countries like Japan, Germany and the United States are good examples that too much of national economic income goes to the corporate sector, and not enough to the labor sector. As a result, people don't have enough spending power, and therefore the demand for investment is subdued," he said. "If you are a factory owner, why would you build a new factory if people do not have the money to spend on your products."

Wheatley thinks China is doing a good job in rebalancing its economy toward services and consumption instead of investment, as the tertiary sector is growing while investment is falling, but he said the nation can do an even better job to accelerate the trend.

To do that, Wheatley suggested that the Chinese government invests less in hard infrastructure and more in social infrastructure, such as health spending, education and social security, so that people can have the confidence to spend more as they grow older and save less.

He credits China's concerted efforts to engage in global economic governance, saying the intention is admirable and welcome, but he is keen to see more practical proposals as to how that goal could be achieved.

He does not expect a big departure on economic policy in Hangzhou, as the G20 "is best suited to act in an acute crisis, and it has proved itself as a useful forum for emergency like the 2008 financial crisis, whereas now what we are witnessing is a phrase of chronic economic status, not life-threatening."

As each country's response to the sub-par, lackluster state of economic growth will be different, he says it is difficult to imagine that the G20 will come up with a statement, as it did in 2009.

Commenting on British Prime Minister Theresa May's presence in Hangzhou, Wheatley added that the G20 could be a great opportunity for May and President Xi Jinping to get to know each other and to start the relationship on a positive footing, and a potential platform to signal May's stance on China.

"Even if they do not get the opportunity for a bilateral meeting, May will have the opportunity in her meetings with the British press to set out her position as prime minister, vis-a-vis China."

He expects May's stance toward China will be less effusive and slightly more cautious than her predecessor, David Cameron, but he added, "She is a realist and knows the importance of good trade and investment ties with China. Now, the UK is going to leave the EU, so she has every interest to ensure great relations with China."