Advancing Global Governance by Revitalizing a Regional Institution

While I have suggested earlier that I don’t think an initial  focus on building regional or multilateral institutions is necessarily the best first step in global governance and possibly a means to ‘tone down’ geopolitical competition rhetoric and action, I am now about to contradict myself and this position. For, in the end, there are some obvious regional and international institutions that could encourage collaborative action and push global governance collaboration. And, in fact, I have in mind an obvious one that has – as a current Chinese slang term might well describe it – ‘tang ping’  躺平 – or ‘lying flat’. It is the Trilateral Summit.

Trilateral Summit, you say. Well, yes, actually. The Trilateral Summit is, periodically, a Summit of the ‘key’ East Asia leaders – South Korea, Japan and most meaningfully,  China. A little history here. The Trilateral Summit was first proposed by South Korea in 2004. At that time the three powers met for a separate session at the ASEAN gathering, described as ASEAN plus three. In 2007, at the eighth meeting of the ASEAN plus Three, the leaders agreed to initiate a separate Trilateral Summit. And, in December 2008, the first separate summit was hosted by Japan at Fukuoka. At its initiation the three powers saw the Summit focusing on: closer trilateral relations, the regional economy and disaster relief.  One of the regional security issues that has been in front of leaders repeatedly has been the nuclear weapons program of the Democratic Republic of Korea, the DPRK. In the 2018 summit the FT  described the leaders’ view of the DPRK nuclear weapons program: “the three leaders agreed to co-operate over North Korea and called for Pyongyang to give up its nuclear weapons completely.” While that agreement may no longer hold, it shows the value of this Summit.

The Summit is not quite a leaders’ gathering. While South Korea is often represented by its President and Japan by its Prime Minister, China has generally been led by its premier, not the President.

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Focusing on the China-West Dialogue Project (CWD); Advancing Global Governance; and Improving US-China Relations

Now, turning back to the Global Summitry Project (GSP) and the Vision20 – collective efforts of Yves Tiberghien, Professor of Political Science and Konwakai Chair in Japanese Research at the University of British Columbia (UBC), Colin Bradford, nonresident Senior Fellow from Brookings  and myself, the Director of the Global Summitry Project. We have initiated various research initiatives.

A critical major effort over some three years has been the China-West Dialogue Process (CWD). The CWD has been Co-Chaired with Colin Bradford, the lead Co-Chair of the CWD and myself. This initiative has held some twenty plus virtual gatherings and many participants are set to gather in person for the first time in years at the Global Solutions Summit in Berlin May 15-16th <https://www.global-solutions-initiative.org/programs/china-west-dialogue/?utm_source=MASTER_Verteiler&utm_campaign=33fe63ffef-EMAIL_CAMPAIGN_2019_11_11_10_44_COPY_01&utm_medium=email&utm_term=0_4f4e08bb85-33fe63ffef-447373003> to focus on US-China relations and assess how the G20 can advance critical, and dramatically needed global governance issues – global debt management, climate change policy, global food security and health security.

What is required, however, and is currently missing, is that the two leading powers turn their minds to such critical global governance policy efforts – both bilateral and multilateral.  From the beginning the CWD has targeted first Trump policy and now Biden foreign policy. Trump Administration officials made it clear that ‘engagement with China’ born in the Nixon Administration was at an end. Both Administrations called for competition though not for conflict. The outcome so far, especially for bilateral relations has been dismal.

As my Co-Chair Colin Bradford wrote on March 7th: “The strategic competition between the US and China is real and must be accepted and managed. But the confrontational narratives of this binary relationship are dominating and weakening global leadership and governance and present a threat to the global order.”   As the Editorial of the NYTimes, today, March 12th, urges: “Americans’ interests are best served by emphasizing competition with China while minimizing confrontation. Glib invocations of the Cold War are misguided. It doesn’t take more than a glance to appreciate that this relationship is very different. Rather than try to trip the competition, America should focus on figuring out how to run faster, …” <https://www.nytimes.com/2023/03/11/opinion/china-us-relationship.html?referringSource=articleShare>. Competition is not the problem for the Biden Administration; but collaborative policy making certainly appears to be. And current policy has made it more difficult. All one needs to do is to examine the interaction of the Biden Administration and the Chinese Government and Party on “balloon gate”. As Paul Herr of the Chicago Council identifies in his post at EAF: <https://www.eastasiaforum.org/2023/03/12/ballooning-mistrust-in-the-us-china-relationship/?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter2023-03-12> “Washington and Beijing’s response to the appearance of a Chinese surveillance balloon over the United States in February 2023 illustrates several aspects of the current US–China relationship that will make it very difficult to reverse the downward spiral in bilateral ties. The episode displayed mutual distrust, latent hostility, a failure to communicate and the adverse impact of internal politics on how the two sides deal with each other.”

As the CWD has identified at the GSI CWD Website – <https://www.global-solutions-initiative.org/programs/china-west-dialogue/> “The CWD’s fundamental goal is to help reshape the narratives and behaviours of US-China relations from friction to function by engaging other middle and major powers and emerging powers in a reframed China-West relations in G20 processes and other public forums. The aim of the Project is to identify new political dynamics that yield more productive relations in the international system.” At the CWD has identified, and noted by Colin Bradford on March 7th: “The CWD has concluded that the G20 is the most important platform for profiling and actualizing these alternative political dynamics in the year-long official G20 processes, which could enable convergence on systemic threats and ease geopolitical tensions.”

It is a challenging  goal in the face of current difficult US-China relations – but crucial for settling global order relations that have become ‘so rocky’ and unsettled in the last several years.

March 12, 2023

 

Impact of zero-Covid Policies on the CPC, the Government and Xi Jinping

Protests against the zero-COVID policy in China quickly spread across the country. While Anti-COVID protests are certainly not a new global phenomenon, such a public and widely spread expression of frustration towards the Chinese government is rarely seen.

This note examines the Chinese top level leadership’s approach to the zero-COVID policy; why it led to mounting public anger and frustration; and where it may lead.

The Initial Approach – Central Government’s Blame Avoidance

 While President Xi vowed that he will “supervise and deploy (COVID-19 prevention operations) personally”, the COVID-19 prevention throughout the country took on a decentralized approach.[1] In other words, the order (of no COVID cases) was delivered by the Central Government, but it was up to the local authorities to interpret the order and execute it. For instance, each province has its own mandatory QR code system that rated users’ risk of exposure to COVID-19, and each province had its own domestic and international arrival quarantine requirements.

As power becomes more consolidated within the CPC, it would only appear plausible that the whole country would take on a centralized approach for COVID-19 strategy such as a national QR code system and a standardized requirement for traveling and quarantine. Nevertheless, these decentralized approaches were permitted to continue in the past two years. Frequently, these inconsistent COVID policies among provinces and regions in China caused confusion and frustrations among residents and travellers. This could be viewed as the Central Government’s strategy for ‘blame avoidance’. By providing an opaque order of “no COVID cases”, the Central Government shifts responsibilities to the local governments while leaving them to interpret its own plan. If the strategy is successful, the Central Government, or President Xi himself, could take credit as the operations are overseen by him “personally”.[2] In the event that the strategy is unsuccessful, or controversial, residents naturally would hold the local government accountable as they implemented these procedures.

Too Little To Lose?

A stable society based on rapid economic growth has been a key goal of the CPC. The idea of “you can earn money and spend money but don’t touch politics” is an unspoken social contract among many Chinese and foreign citizens and companies. While China enjoyed rapid economic growth, so also its middle class. Owning at least an apartment and a vehicle and living comfortably have already become the default goal of many middle class citizens. Based on the prerequisite of not participating in politics, these goals are achievable when the balance of the ability to earn a decent wage and reasonable cost of living is maintained. The Chinese citizens know very well that what they have accomplished and acquired could be lost very quickly if they are disobedient to the government. Therefore, most citizens have chosen to refrain from directly criticizing the government for its actions.

With a decelerating economy, however, this balance of economic advancement and political silence is eroding. In major cities such as Beijing and Shanghai, it is hardly possible for youth to find a job that pays high enough to support themselves and afford an apartment or vehicle. The draconian COVID measures further impeded citizens’ ability to find jobs and get paid; hence, their ability to make new purchases. According to the National Bureau of Statistics, real estate development between January 2022 to July 2022 dropped by 6.4 percent while residential investment dropped by 5.8 percent.[3] On the other hand, major online shopping platforms often publish sales volume during November 11th, Single’s Day.[4] According to Sohu News, online shopping platforms such as Alibaba and Tmall both recorded double digit or triple digit growth in sales volume in the past several years.[5] Nevertheless, Tmall did not disclose its sales volume for 2022, instead it published a statement that “the sales volume was largely the same as last year”.[6] These moderated data could also suggest that the general public prefers to save their money instead of spending it given their job stability is affected by the unpredictable COVID policies.

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The Current Narrative of the Chinese Communist Party’s Foreign Policy: “A Community of Shared Future for Mankind”?

When it comes to China’s current foreign policy, phrases such as “Wolf-Warrior Diplomacy” (WWD) and “Belt and Road Initiative” (BRI) frequently appear. The name WWD originates from a Chinese film series, “Wolf Warrior”, which depicts a patriotic solider battling foreign powers and mercenaries. Nowadays, many refer to China’s increasingly strong statements and assertive diplomatic declarations as WWD.

On the other hand, BRI refers to global infrastructure development projects led by China to promote international cooperation, multilateralism, and trade. It may appear that these two sets of foreign policy approaches rather conflict. However, the phrase “A Community of Shared Future for Mankind” (人类命运共同体), a part of the official narrative of China’s foreign policy may have led to both of these contrasting approaches. What is “A Community of Shared Future for Mankind”? How does this phrase explain trends in China’s recent foreign policies including WWD and also BRI?

What is “A Community of Shared Future for Mankind”?

By literal translation, the above phrase means “A Community of Shared Fate for Mankind” (SF) rather than, as it is often expressed in English, “A Community of Shared Future for Mankind”. SF suggests a global order described by China’s President Xi Jinping encompassing the shared rights and responsibility of each nation in terms of “politics, security, economy, culture, and environment” in a globalized world. In President Xi’s words SF is: “to build A Community of Shared Future for Mankind [to] construct a beautiful and clean world with long lasting peace, general security, mutual prosperity, openness, and inclusivity”. At a United Nations Economic and Social Council (ECOSOC) meeting in July, 2020, China’s Foreign Minister Wang Yi argued that China will push to build SF by promoting multilateralism in accordance with international laws and “… denounce global hegemony and protectionism”. These and other  remarks by China’s leaders demonstrate, it would seem, the Chinese Communist Party’s (CCP) ambition to achieve greater global influence, and that China is prepared to work with all nations to build a SF. Indeed, not all nations may be agreeable with the ideology of SF. It is inevitable that the CCP will face some frictions when it tries to expand the influence of SF in the world. Therefore, the CCP may have to use a tailored approach in its foreign policies to push its SF agenda.

SF as an Umbrella term for China’s Foreign Policy

President Xi has publicly made statements such as “[the CCP] will reference history and create the future. It must continuously push and construct A Community of Shared Future for Mankind”. Under this guidance, top Chinese officials have made clear that China’s foreign policy will revolve around SF. China’s approach to global order, then,  promotes politically correct topics such as climate change, global disparity, and it also opposes terrorism and hegemony. Although it encourages cross-cultural exchange, it makes no explicit mention of protecting the rights of marginalized communities. The vague language in the SF permits CCP officials greater flexibility in deciding what kind of matters are consistent with the SF and therefore align with President Xi’s agenda.

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How Japan Can Navigate Growing US-China Tensions

US-China tensions have emerged to dominate the geopolitical space. How is this rivalry affecting states, particularly in the Asian context? Japan, a long-standing ally to the US, and at the same time a key economic partner to China, finds itself, as do other states in the region, in a difficult position. Still the US-China rivalry alone fails to fully define the foreign policy challenges Japan faces currently. With the Olympics just recently completed in Japan, and COVID-19 numbers on the rise, vaccination numbers still relatively low, continuing cool relations with South Korea, nuclear tensions with North Korea, and finally a looming national election, it is important to recognize that there are a variety of serious issues that Japan’s current political leadership faces.

The US provides Japan with defence and security, but China boosts the Japanese economy, with 22% of Japanese exports going to China in 2019 alone and increasing another 5.1 percent in 2020. Japan is wary of losing its status as a major power but understands that choosing between the two superpowers is surely a lose-lose proposition.

Territorial Disputes

Territorial disputes are a long-standing issue for Japan. Between 2010-2012 tensions began escalating with China over the Senkaku Islands in the East China Sea. However, while the Senkaku Islands remain an area of contention, the question of Taiwan is a cause for even greater concern. Japan’s southernmost island, Yonaguni, is just some 111km east of Taiwan, and in recent months, China’s presence around Taiwan has grown. Threats have increased. In April 2021, when Prime Minister Suga visited President Biden in Washington, their joint statement on the renewal of the US-Japan partnership mentioned “Taiwan” for the first time since 1969: “We underscore the importance of peace and stability across the Taiwan Strait and encourage the peaceful resolution of cross-Strait issues.”

Beijing responded harshly to the statement and accused the US of interfering in “internal affairs”. For a country like Japan, a response of this nature raises concern: China’s been known to utilize economic means to retaliate against countries that condemn their actions. Therefore, while it may be important for Japan to collaborate and work with the US on matters relating to Taiwan, Japan is treading quite carefully with China.

Former Japanese Prime Minister Yukio Hatoyama argued that the US-Japan Joint Statement’s mentioning of “Taiwan” was counterproductive to seeking cooperative relations with China. However, various US military officials in the Indo-Pacific have argued conflict between China and Taiwan is highly probable in the next six years. Given Japan’s proximity to Taiwan and the US’s presence in the region, Japan must consider the wider geopolitical implications.

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Biden, Suga, Xi and Yes, Others – the New Mix Reshaping Global Order Relations

 

The current state of the international system. That is what I hope RisingBRICSAM can tackle in the next set of posts. While I remain the named blogger here at RisingBRICSAM,  I shall not be undertaking this task alone. Nope. I have been fortunate enough these past weeks to be working with a great set of recent, or near MGA graduates from the Munk School of Global Affairs & Public Policy, University of Toronto.

And all of us in various ways have had  opportunities to examine in some detail aspects in the evolving global order. In addition, many of these same researchers have joined in the China-West Dialogue (CWD) research and online meetings. But more on that in a moment.

 

There is as you will see a host of significant influences shaping the global order and its politics. Probably the most immediate has been Covid-19. The waves of the virus have had a significant influence on all the major and minor actors in the global system.

The global public health crisis has also underscored the growing array of new actors in the global order. Of course the many states – leading powers, major powers, emerging and developing powers, and also the international organizations both formal and the often forgotten but in fact critical informal institutions.

The array of these state actors have been significantly supplemented during the pandemic by sub-state actors – whether regions, networks or local actors and even more dramatically non-state actors such as foundations, public and private corporations.  The pandemic has underscored the growing role of technology and digital organizations. One of the envisaged posts will focus on the global developments of Agenda 2030 – the 17 Sustainable Development Goals (SDGs) – and the threat that the Covid-19 pandemic has posed to achieving these critical global development goals by the end of the decade.

The virus has been dramatic globally. But then as well has been the replacement of the Trump Administration and its ‘America First’  foreign policy in the United States with the Biden Administration’s autocracy versus democracy and build back better world (B3W). Both administrations grappled with, or amplified, the reemergence of geopolitics with the intensifying rivalry between the United States and Xi Jinping’s China. Even in these early months, the Biden Administration has represented a highly different domestic and diplomatic effort from the often chaotic years of Trump policies though it appears the Biden Administration has moved slowly on revising aspects of American foreign policy including with China. Some of the early and continuing analysis and research at the Global Summitry Project (GSP)  on US and US-China foreign policy has been undertaken by the China-West Dialogue Project (CWD) co-chaired by Colin Bradford, non-resident senior fellow from Brookings and myself. For almost two years we have met largely virtually with thought leaders – former officials, policymakers, academic experts – from around the globe to build a narrative that can accommodate competition, avoid confrontation and vitally permits collaboration – an approach that counters the ideological divisions that have emerged with rising US-China tensions.

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Measuring American Foreign Policy for ‘Competition without Catastrophe’: The Alaska US-China Summit

With President Biden’s first official news conference last Thursday March 25th, the news conference brought the curtain down on the first meeting of top foreign policy officials from the United States and China. The public side of the Summit was a rather fiery uncooperative back and forth between the leading government officials from both China and the United States. We are led to understand, however, that the private meetings that went on into the next day were more productive. And with both encounters past, the shape of the competition between China and the United States began to take some public shape.

For some time now we have been made aware that a more confrontational  approach in US-China relations was likely. As David Sanger describes in a recent NYT article, the ‘Washington beltway’ view has crystallized around a far more competitive foreign policy with China. And the Biden foreign policy has reflected, seemingly, this rare political consensus:

For a president barely 10 weeks into office, casting the United States as confronting a global struggle with the Chinese model has some clear political benefits. One of the few issues that unites Democrats and Republicans is the need to compete head-on with Beijing.

William Galston at Brookings reviewing American public opinion toward China underscores how American public opinion has turned against China particularly after the Trump years:

All things considered, the Biden administration will enjoy substantial public support if it places competition with China at the center of its foreign policy, and it will pay little price for the blunter rhetoric its senior officials employed during the recent meetings in Alaska with their Chinese counterparts. On the other hand, most Americans have not focused on the military dimensions of this emerging relationship and are not prepared for a possible conflict over Taiwan.

Advisors to Joe Biden during the election period, and many of these same folk now as officials for President Biden, are describing and clarifying US policy toward China that they had previously written about pre-election. The dominant position as articulated by the senior policy folk such as Jake Sullivan, now National Security Advisor to the President and Kurt Campbell now the ‘Asia Tsar’ is strategic competition, or slightly more poetically, ‘competition without catastrophe’ the title of their consequential 2019 FA article. Continue reading

Washington’s Unfounded Fear of Biden Collaboration with China

 

The Washington Beltway remains in a ‘tizzy’ over the direction of Biden foreign policy. Will Biden commit to the bipartisan ‘full-throated’ competition with China. Here, Ryan Hass of Brookings describes that continuing nervousness on the part of the foreign policy establishment over a possible Biden strategy : 

 

There are a variety of causes for these concerns. Some security-focused experts worry that the Biden administration will prioritize cooperation with China on climate issues above other strategic concerns. Others fear that by signaling interest in cooperation, the United States will show lack of resolve for long-term great power competition with China. Proponents of viewing the U.S.-China relationship as an entrenched ideological struggle worry that cooperation could dilute the focus on what they describe as each side’s irreconcilable ambitions. Some have shared concerns that Beijing will withhold cooperation on climate issues unless it receives American concessions in other areas of the relationship, for example, on Hong Kong or Xinjiang. Others worry that the Chinese are wily negotiators who will hoodwink their earnest American counterparts if given the opportunity. Still others argue that engaging the Chinese as peers on climate issues provides undeserved validation of China on the world stage and legitimation of the Chinese Communist Party at home.

Besides Ryan Haas at Brookings, concern about Biden’s China policy has also been raised by his colleague,  Thomas Wright. In TheAtlantic. Tom has suggested in a recent article that Biden’s choice of John Kerry as special presidential envoy on climate change may well create problems for the new Administration on the critical China file.  

Competition with China will likely be the most difficult foreign-policy issue that President-elect Joe Biden will face. What he decides to lead with and the precise mix of areas in which he engages and confronts Beijing are critically important. This is why Biden’s choice of John Kerry as a special presidential envoy on climate change might create a problem for the incoming president on China policy.

In discussions with Biden colleagues, Wright comments that they expressed concern over Kerry diplomacy. Kerry’s single-minded focus on climate change could, according to these colleagues, bring climate policy progress but sacrifice other security-related US-China matters. As Tom described his conversations with these Biden folk:

A former Obama administration official told me, “China’s diplomacy is a constant search for leverage, and Kerry will deliver a load of it in a wheelbarrow right to their front door every day.

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The March of Global Order

This Post is a collaboration with Yves Tiberghien Professor of Political Science at UBC and RisingBRICSAM blogger Alan Alexandroff.both Principals at the Vision20. It underscores that key actors in Asia, Europe and elsewhere are not waiting on the United States to return to global collaboration and multilateral action.

Out of Asia there is a major push on various global governance fronts. The world is not waiting for the United States. And in fact Joe Biden, the President Elect and his people are going to have to think ‘hard’ about whether they are prepared to be ‘left behind’ in the march forward of various multilateral gatherings. Are the demands of domestic politics and the Democratic Party’s distaste for ‘free trade arrangements’ going to leave the Biden Administration lukewarm to rejoining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership or CPTPP? Lukewarm leaves the United States on the outside of efforts to integrate trade and investment in Asia and beyond.

While the Regional Comprehensive Economic Partnership (RCEP) is a limited integration of trade and investment, nevertheless the RCEP is the largest regional agreement concluded in Asia. The Pact covers 2.2 billion people and 15 countries . It includes China and other major economic actors including Japan and South Korea. As the NYTimes (2020) points out:

The pact will most likely formalize, rather than remake, business among the signatory countries. Its so-called rules of origin will set common standards to determine whether a final product qualifies for duty-free treatment, potentially making it simpler for companies to set up supply chains in several different countries.

While the RCEP lacks significant and needed steps to further liberalization and common regulation in key areas such as services trade, e-commerce, intellectual property protection and the elimination of manufacturing subsidies it is a key advance for the Asian region. As pointed out by Yves Tiberghien (2020) in a just published EastAsiaForum post:

RCEP will advance the acceleration of regional economic integration in Asia, and pushes back on Trump’s strategy of decoupling of US allies from China. While Southeast Asian countries, Japan, South Korea, and Australia may all be wary of China at the moment and seek diversity in their trade relations, they simply cannot sustain their prosperity without stabilisation of trade relations with China. Asia is criss-crossed by ever intensifying value chains, and China’s still an integral part of that. Vietnam and other ASEAN countries are rising as manufacturing hubs, but that’s a process accompanied by increased imports of intermediary goods from China.

But RCEP is also of global significance. The agreement, signed off in the middle of a pandemic and US–China trade war, reminds the world, first, that East Asia countries, unlike the Americas and Europe, have broadly succeeded in controlling COVID-19. That success, across different types of political regime, with a similar respect for science, expertise, and trust in government, was accompanied by general acceptance of mask-wearing and community rules.

Second, it also reminds the world that the biggest trading group in the world economy is doubling down on the rules-based multilateral system. Research by Homi Kharas shows that most of the increase in the global middle class until 2030 will take place in China and Asia.

 

RCEP also embeds the first trilateral agreement between China, South Korea and Japan, itself a huge deal. The common interests of these three countries have over-ridden tense geopolitical relations across the Asia Pacific. RCEP underscores the pragmatic efforts of Japan to balance its strong security stance on the South China Sea and in the East China Sea with stability in the bilateral relationship with China. After the completion of the CPTPP, the EU–Japan partnership, and the US–Japan agreement, this marks the completion of the Abe trade agenda (even though Japan would have preferred India to join RCEP). …

As well, RCEP brings significant institutionalization to Japan’s economic relations with China, including a new chapter on e-commerce (with a ban on data localisation requirements), rules on government procurement, and rules on intellectual property rights that go beyond WTO rules. The same calculations drive Australia’s readiness to sign RCEP in the midst of a bitter, but hopefully short-lived, trade fight with China.

The coming Biden Administration needs to rethink its reluctance to rejoin the CPTPP. If it fails to do this it could be on the outside of growing multilateral economic integration and possibly more.

Image Credit: Vietnam News Agency, via Associated Press.

‘G2’ and the Expectations Game

While designed to build consensus among a broad group of countries, a significant aspect of the G20 has been a consolidated discussion between the leaders of China and the United States. US President, Barack Obama and China’s President, Hu Jintao have used these informal talks for relationship building.  These informal discussions have until now complemented the G20 leaders’ process. But if these US-China leaders’ talks take hold, it may also prove to be a principal rival to the G20 dialogue.

A new game of expectation-raising has begun to swirl over what has been dubbed the “G2” in anticipation of renewed strategic dialogue and the home-and-home state visits announced for 2009, with President Hu visiting Washington in late-summer and President Obama visiting Beijing in late-fall. While the US-China bilaterals will not lack for issues, indeed there are already a series of bilaterals between China-US officials, it remains to be seen how in-depth the two leaders will want to harmonize global economic strategies. Will these encounters survive expectations? Will the G2 serve as distraction to the G20 process?

China’s global status can hardly be ignored. While the economic fires rage on in New York, London and Tokyo, Beijing has demonstrated a cool confidence and continued growth. In the lead-up to the London Summit, People’s Bank of China Governor, Zhou Xiaochuan made very public declarations on the perils of over-reliance on a single currency for global reserves, advocating instead for a standardized, SDR-type currency valuation less prone to volatility. In London, Paola Subacchi of Chatham House commented that, “China graduated from regional to global power. It showed political and financial muscles and the appetite to be involved in the global dialogue – with also an interest in developing a closer relationship with Washington.”

A leading voice in support of an informal G2 “leadership conclave” has been C. Fred Bergsten of the Peterson Institute. As early as 2006, he advocated bilateral diplomacy to support China’s and America’s “joint responsibility” to ensure global financial stability. Recent events have revived proposals for such a format.  These advocates have stressed the need for the two countries to resolve currency disputes and jointly enforce IFI reforms.

In his analysis, CIGI Senior Fellow Gregory Chin suggests that failure or frustration in a divergent G20 process may feed a “Great Power withdrawal into the bilateral track to deal with matters of highest strategic importance. This could mean confining the multilateral track to implementing the decisions made by the Big 2.” This should not immediately be considered a negative outcome. While the G20 scores high on legitimacy, its efficiency and compliance have waned. Resolution of the multitude of issues on the US-China bilateral agenda alone (from trade to currency valuation to intellectual property) could ease gridlock in many international negotiations. However, expectations for a lean and authoritative G2 assume that the two leader countries can abstain from squabbles over human rights, the proverbial ‘third rail’ of US-China relations.

While certainly there are larger strategic factors at play, the success of a G2 would heavily depend on ability of the leaders themselves to get along and work constructively. Can the ever technocratic Hu find common ground with the always affable Obama? The new American President shows an understanding of the importance of the bilateral relationship. Following their first meeting, President Obama noted that, “I continue to believe that the relationship between China and the United States is not only important for the citizens of both our countries but will help to set the stage for how the world deals with a whole host of challenges in the years to come.”

Indications from inside China, however, seem to downplay any expectations of a G2. In the days before the London Summit, leading scholar Huang Ping of the Chinese Academy of Social Sciences (CASS) asserted that “the so-called G2 is both unrealistic and problematic to fit in with the traditional Chinese value of a harmonious world.” By pushing other regional and global developing economies out of key international decision-making, China could risk alienating its like-minded allies in the global South. Continued success of the G20 fits in much better with this approach, and Dr. Huang suggests that China should promote this larger steering group.

Whether formalized or not, a G2 appears to be inevitable, if in nothing but name only. As the two leaders meet, the US-China forum will be cast in this light with enormous scrutiny. ‘G2’ will become the favored term of pundits, perhaps to its detriment.

A major stumbling block for the G2 may end up being the two nations’ cultural differences in their fiscal behaviors. Arguably, the US propensity to spend and the Chinese need to save drove the world into crisis and offered recovery, respectively. However, this balance has proven unsustainable and the macro-economic structure must be fixed. Recovery relies on the two governments providing their citizens with the correct incentives towards long-term restorative fiscal behavior. Yet, to appear successful, a G2 will need instantaneous results.

In his column, “What the G2 Must Discuss Now that the G20 is Over” (7 April 2009), the Financial Times’ Martin Wolf suggests that while China’s desire to engage the US may be self-motivated – to stabilize its US currency reserve, deflect exchange rate reform, and rebalance spending-saving – it is a “necessary condition for serious discussion of global reforms.” If arranged properly, a collaborative G2 would have the potential to remove policy obstacles and pave the way for general agreement across the board. However, if used as another opportunity to name and shame each other, it could heighten tensions in an already delicate relationship.

The most likely outcome is a mediocre G2, one that cannot live-up to the overblown expectations. Here, enters again the G20, this time with a strong dose of modesty and a previously excluded group of leaders more committed than ever to be a part of the process. If however the G20 can forgo this chain of events by harnessing leadership from within and boosting national compliance and effectiveness, plurilateral consensus may trump dyadic centralism.