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The G7 and China in the Management of the International Financial System

Professor John Kirton
Department of Political Science
Centre for International Studies
University of Toronto

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5. Prospects and Proposals for Strengthened Partnership: Options for Intensified Association

Looking ahead, there are thus good grounds for considering the rationale and developing the options for the enhanced institutionalized association of China with the G7/G8, including its possible involvement at the leaders level, and possibly as early as the Japanese-hosted Okinawa summit on July 21-3, 2000. In practice, although it is not self evident that the Russian case is the only relevant referent, the G7/G8 attitude will be heavily based on their recent experience with Russia. This includes the issues of why the G7 had such a powerful interest in Russia, whether the process and fact of Russia's admission has lessened in practice the criteria of the domestic democratic character and performance of a member in the larger interest of socializing difficult but powerful countries, and whether the Russian inclusion thus far has yielded as much or more than its early enthusiasts and ultimate deciders envisaged. Yet beyond any disappointments with or euphoria over recent Russian behaviour, as with Chechnya or Kosovo respectively, it is important to also take a more forward looking intellectual approach, and one focused more firmly on the specificity of China.

From the perspective of the G7/8, the rationale begins, as with Russia, with the collective strategic interest in the full integration of China into the global system, with the full and balanced set of rights and obligations which accompany that status. The current issue is whether China, even under the current leadership, has a political culture, ideological legacy, and distinctive national values that would allow it to contribute meaningfully to the development of a G7/8 consensus on core issues such as the reform of international institutions. From the perspective of China, the question is whether they would wish to move from their current position midway between the developing countries and the G7/8, and absorb the adjustments in their position on several issues that such a movement toward greater association would require. There are grounds for caution on both counts.

In developing options for enhanced association, however, several conclusions from the record of the past decade serve to provide a rationale, set a path, and define a degree of advance, for the next steps. To begin with, China's record during the 1997-9 financial crisis sustains the case that there is sufficient convergence and compatibility of interest between China and G7 members to make a further degree of institutionalized association potentially desirable and workable. Secondly, given the exceptional position of China, and the need to maintain the G7/8's core asset of constricted participation, it is China alone that could and should be accorded this next incremental upgrade. Thirdly, such an upgrade should be limited, and be less than full membership at present, in recognition of the core democratic character of the existing G7 club, and the need to maintain a democratization incentive vis a vis countries such as India, Russia and China itself. Fourthly, such an association should not create a configuration limited to either the economic or the political domain, or indeed to a singular or selected aspect of the G7's agenda. For during the past decade the G7 has cumulatively recognized China's multidimensional relevance. Moreover the unique strength of the G7 from its inception has been its ability to link political and economic dimensions to the mutual support of objectives in each domain. And both G7 and China's objectives during the international financial crisis and system reconstruction are premised on a linkage of both domains, if with distinctive end states currently in mind. This factor of multidimensional relevance and linkage suggest concentrating a list of options on those components of the G7/8 system where China is currently under-associated, but including one's which relate to the unique ability of leaders to embrace, link and tradeoff considerations from all domains.

The first option consists of an association with the G7's functional bodies, at the ministerial level and below. Such a step has several precedents, both in the creation by the G7 of regimes initially confined to G7 members, but that expanded over time on a functional basis to include outside countries of greatest relevance. As the involvement of Ukraine at the 1995 Winnipeg ministerial conference suggests, it is possible, even at the ministerial level, to single out a single country for such association, and to do so in ways that do not create a presumption or dynamic of recurrent and permanent participation.

On the assumption that the G20 will serve in the near future as an adequate forum for dialogue on the core financial issues, and that the accumulating experience in such finance-focused forums will sustain the case for constructive dialogue, enhanced awareness and attitudinal adjustment through greater association, attention would be devoted under this option to identifying G7/8 forums where China is most likely to make an issue specific contribution. Of particular interest, given China's global and regional security role, is to associate China with the G8 foreign ministers forum. This could take the form of a joint meeting on the margins of the United Nations General Assembly next autumn, at the December 1999 Berlin conference on peacebuilding or at the G8 foreign ministers meeting in Miyazaki in the leadup to the Okinawa summit.

A second option envisages an association at the leadership level. This would allow a full array of issues to be considered, at the discretion of each party to the dialogue. It would allow large, initially intellectual and cognitive, linkages and trade offs to be made. It would reap the full advantage of the Summit's role as a deliberative institution. And it would better signify the enhanced status China could deserve in the international community. The central objective of the G7/8 would be to secure a first hand understanding of the future intentions of China's leadership in the reform process, and to encourage them to move from a regional to a stronger global perspective and sense of responsibility. The first summit of the new millennium, and one being held in Asia, would provide an appropriate symbolic occasion for such a step. The presence of China would reinforce the objective of an otherwise reluctant Japanese host in having an Asian focus for the Okinawa summit.

Any move to association at the leaders level should begin, and could be confined to, preparatory steps. These would include the inclusion of China on the pre-Summit tour of G8 colleagues that Prime Minister Obuchi could take. It could expand into a meeting in Japan on the eve of the summit between the Chinese leader, should he prove willing, and Prime Minister Obuchi as summit host, along the lines of the honour Japan accorded Indonesia's President Suharto when the former hosted the last G7 summit in 1993. As in 1993, Prime Minister Obuchi could be accompanied by any G7 colleagues who wished to participate. Japan's two G7 partners in the North Pacific Triangle, and Russia, might see it in their interest to do so.

The third option is to hold a formal meeting between China's leader and the G7/8 as a collectivity, on the eve of the opening of the G7 and G8 summit. As with the dinner dialogue between the G7 leaders and the 15 developing country leaders that French President Mitterrand invited to Paris on the eve of the opening of the Summit in July 1989, such a format would enable an exchange of views on a full array of subjects, with a timing that would enable both G7 leaders and G8 leaders to take maximum account of China's positions and perspectives in their deliberations in the following days. It would be a sufficiently large advance that it could make it easier for China's leadership to accept such an invitation.

Such options would appear to be cautious steps, in contrast to the bold vision aroused by Chancellor Schroeder of making China a full summit member in one large, complete and irreversible step. A similar contrast arose in the wake of President Bush's public musings at Munich in 1992 that Russia should be admitted as a full member of the G8 club. But caution is in order, especially as the G7 and G8 remain fully preoccupied with absorbing a Russia whose challenges may well provide enough work for another decade. Yet the lesson of Russia underscores the advantages of advancing the hitherto very tentative association with China, both to mobilize China's very real strengths, and to address at an early stage its vulnerabilities before the costs they could create compound.

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