By Zhou Shixin

There are likely to be many expectations raised and hopes frustrated before and after the London G-20 Summit on April 2. The most powerful countries in the world will discuss, negotiate, and bargain with each other over the redistribution of the world power and the resolution of the international economic crisis.

There are many differences of opinion among the participants, some of whom regard the summit as the turning point of a new world order as many developing countries take part in the summit and hold talks with the developed countries. They are all eager to find a way to tackle their problems and defend their positions during the conference.

Zhou Shixin, researcher fellow of Institute of Foreign Policy Studies, Shanghai Institutes for International Studies.

The US, at the origin of the current international financial crisis, sees the summit as an opportunity to lead the world, extract the US from the financial doldrums, and maintain the US dollar as the most important international reserve currency so that the world will continue to bear the consequences of dollar inflation.

The EU too has suffered much during the international crisis, but is offering solutions that are unlikely to work. While the bigger members such as Germany and France tend towards protectionism in the EU and the world, some East European Countries are on the verge of bankruptcy. The process of EU integration will encounter enormous obstacles if the East European member states are abandoned by the West European developed countries.

With its huge foreign reserves, China is seen by many as having a key role in turning the situation around. The economic crisis hit China late and its effects were muted, and the country seems to be turning the corner quicker than others in the west. Some countries even expect China to lead the summit in putting an end to the dominant international role of the US currency - the President of the People's Bank of China, Zhou Xiaochuan has put forward a proposal for a supra-national world currency.

Indeed, there seem to be many incentives and opportunities for China to play a leading role in the summit – the country's model of economic development and reform has operated efficiently in protecting against the worst of the international crisis. There has been no major social upheaval in China, even while the unemployment levels have risen and the country is threatened by external interference over the Tibetan and Nansha Islands Issues.

However, China faces many dilemmas in London while work goes on with other countries to resolve the international economic crisis.

First, the key issue of domestic stability. China's most important problems come from internal matters. The government has a host of domestic problems to deal with, such as unemployment, or the imbalance in economic development between the west and east of China as well as between rural and urban areas. These internal challenges take precedence over international responsibilities. As a responsible country China always honors its commitments, which are weighed and calculated carefully beforehand, because the country cannot meet them if they exceed its ability to deliver.

Second, coordination of the dollar and international currency. China will not abandon the policy of buying US debt. It is one of the bases of Sino-US cooperation and confidence, and assures the stability of Sino-US trade. The interests of China and the US are so interconnected, or perhaps ensnared, that they must find a way to resolve the international economic crisis that is moderate and not revolutionary. For the moment the idea of an international currency is an ideal that will not be realized – there are too many differences among developed and developing countries. However, it is natural for China to worry about the value and reliability of its US national debt.

Third, the distribution of voting rights in the IMF offers little to China. Compared with the US, which holds almost 19 percent of votes, and the EU, which holds about 30 percent, China has too little influence in IMF regime. China's vote in the IMF will continue to be limited as long as it is based on its share of contributions. Perhaps if the IMF can be restructured along the lines of the UN Security Council, in which China holds a veto right, then China can be expected to make a greater contribution. At the end of the day China is still a poor country by the standard of per capita GDP, and has less expertise and experience than developed countries.

Fourth, balancing of protectionism and free trade. China is confident about its open policy, which welcomes trade and investment from all the countries. On the other hand, China fears that other countries will implement policies of protectionism that could damage the sound balance of trade and investment between China and its partner countries. During the Summit, China must argue a confident case for avoiding protectionism, for all the short-term attractions it might offer to others.

The London G-20 Summit not only represents the interests of the major developed countries, but also of the medium-sized and the developing countries, who all share the responsibility of keeping the international economic order stable and vigorous. The US is not ready to abandon its leading international role. China has no incentive to lead other countries in challenging or overturning the current international order under which its strength and influence is able to grow.

China will stay prudent even as its power grows, remain resistant to flattery, continue to be cooperative in developing relations with others, keep its principles to the forefront when challenged, and be alert to any threats. China will conduct itself in a way that is commensurate with its international and domestic strategic objectives, and follow the appropriate path towards their realisation.

Zhou Shixin, researcher fellow of Institute of Foreign Policy Studies, Shanghai Institutes for International Studies. His current research fields are Southeast Asia studies and China's foreign policy.

(China.org.cn April 2, 2009)