Talking Point

Watch your step

What were the takeaways from the G20 summit in Hangzhou?

U.S. President Barack Obama arrives for the G20 Summit in Hangzhou

Red carpet snub: Obama touches down in Hangzhou through the Air Force One’s emergency exit

Airport arrivals sometimes go wrong, even for special guests. Gerald Ford, the former American president, tumbled down the stairs of Air Force One during a trip to Austria, while Boris Yeltsin was “too tired” to say hello to his hosts after a particularly convivial flight to Ireland. And awkward welcomes were back in the headlines this weekend in the Chinese city of Hangzhou, where Barack Obama turned up for the G20 Summit.

While leaders like Vladimir Putin received the red-carpet treatment, there wasn’t even a rolling stairway for the American, who was forced to leave his aircraft through an emergency door.

Afterwards there were scuffles on the tarmac, with one of the Chinese staffers shouting, “This is our country! This is our airport!” during a heated row over protocol with his American counterparts.

Obama later downplayed the fracas, though like many others he may have been surprised. After all, the Chinese had pulled out all the stops to make the Hangzhou summit go as smoothly as possible.

To this end: factories were closed, clearing the skies of pollution; the streets were emptied of local residents, who were given travel vouchers and a week off work; and state television was streaming songs crooning “I like you, I like you” to the city’s illustrious guests.

With that level of stage management, the conspiracy theorists were soon arguing that the treatment of the US president was a farewell snub (this is likely his last official trip to China before he steps down in January). The thinking goes that the slight was motivated by his ‘pivot to Asia’: a policy which the Chinese see as an attempt to thwart their country’s rise.

Trying to get to the bottom of the debacle, the New York Times reported that the incident resulted from a catalogue of protocol clashes that began with the Hangzhou airport staff reversing a previous decision to allow the US team to use its own rolling air stairs (which had been flown into the country in advance, a practice in accordance with previous presidential trips to China). However, while the Americans agreed to use a Chinese stairway instead, problems quickly arose because the driver of the stairs couldn’t understand the instructions from the American security team, and they couldn’t understand him.

A request had been put in for an English-speaking driver – but to no avail. That said, by the time Air Force One was landing, the Chinese had relented, and according to the New York Times they told American security officials they could use the American stairs after all. But by then, US staff claimed, there was no time to make the switch.

This resulted in Obama exiting through the belly of the aircraft, via foldout stairs, a practice generally only used, the New York Times further pointed out, in places with high security concerns such as Afghanistan.

(The UK’s Guardian newspaper cited a China expert who reckoned it was not a mistake but a deliberate attempt to force Obama “go out of the ass” of Air Force One.)

The New York Times version of events speaks less to conspiracies than to bureaucratic clashes and linguistic failures. Nevertheless the optics of Obama’s arrival did set a slightly mistrustful tone for a busy two days of politicking in Hangzhou.

Why was the summit important for the Chinese?

The Group of 20 first met after the onset of the global financial crisis in 2008. At the time, Obama and the British Prime Minister Gordon Brown claimed victory for saving the world from a 1930s-style meltdown.

But now China wants to be seen as leading the efforts to deliver meaningful change, something that Xi Jinping, the Chinese president, addressed directly in his opening remarks that the G20 “should work with real action, with no empty talk”.

This is only the second G20 summit to be held in Asia, and it’s the first on Chinese soil. The Chinese authorities take these global gatherings more seriously than most. Like the lead-up to the Beijing Olympics in 2008, the Shanghai Expo of 2010 and the APEC summit two years ago (see WiC260), the preparations have been painstaking.

The meeting is being held in a city that Xi Jinping knows well, after serving for five years as the top Communist Party official in Zhejiang, the province of which Hangzhou is capital.

WiC introduced Hangzhou in the first of our Sinopolis series earlier this year, citing its natural beauty, especially its West Lake, which features prominently in classical poetry and painting (our Sinopolis city guide can be downloaded from our website).

That reputation draws in millions of tourists every year but Hangzhou has been developing newer pulling-power as one of the country’s high-tech hubs, led by the emergence of Alibaba, China’s leading e-commerce firm.

In this regard the city symbolises China’s transition from a manufacturing base for foreign firms to a higher-tech economy for homegrown champions, and its story chimes well with Xi’s celebration of “innovative growth”, which he’d put high on the G20’s agenda.

Other local commentators have showcased the summit as a sign of the sweeping transformation in the economy, and how places like Hangzhou are now taking top billing.

“China has moved past the phase where it needs Beijing or Shanghai to show a Chinese image,” Zhang Jingwei from Charhar Institute, a think tank, told the Global Times. “Instead, various cities are beginning to host global events. It might be suggested that this is a display of political confidence.”

What does China want from the G20?

The Chinese focused on the longer-term, highlighting more abstract goals like innovation and governance in the summit’s agenda. Their leaders have also wanted to emphasise the reforms that the country has already undertaken and give notice of the changes they would like to see in the global monetary system, say Qu Hongbin and Julia Wang at HSBC. That includes the renminbi’s inclusion in the IMF’s Special Drawing Rights basket, which goes operational next month. Meanwhile green finance is another priority – at least Rmb120 billion ($17.97 billion) of green bonds have been issued in China since the start of the year (or almost half of the green bonds issued worldwide).

In other activities shortly before the summit Beijing announced the creation of seven new free-trade zones. It has also signalled wider access to Chinese equities through the launch of a new stock-trading scheme between Hong Kong and Shenzhen later this year (see WiC337).

In an unexpected sign of progress, Beijing joined Washington in ratifying the Paris climate accord on the eve of the meeting as well, an important step towards implementing the pact against global warming first negotiated in 2014.

So what wasn’t discussed?

Some of the thornier political issues didn’t get much airtime. The biggest elephant in the room was the maritime tension in the region, following an international ruling at the Hague against Chinese claims to rights in the South China Sea in July. The Chinese refuse to discuss these kinds of disputes at global or regional forums, insisting that they are handled on a bilateral basis. It was no different this week, with the maritime row kept off the agenda.

“The G20 summit shouldn’t be distracted by a sea spat,” the Global Times proffered as an editorial headline, with a little more understatement in its terminology than normal.

All the same, American officials said that President Obama had raised the issue during a “candid exchange” with his Chinese counterpart before the summit began.

Another area in which China has differences with some of its peers is industrial policy, where frustration is growing over excess production from its steelmakers.

Again, there were signs of the hosts wanting to look proactive in advance of the summit, with much media fanfare that Baotou Steel was dismantling one of its blast furnaces, which should lead to the retirement of 1.33 million tonnes of production capacity.

But China is well behind on this year’s targets for reducing its metals production and there were reports last week that American negotiators backed by the Europeans and Japan had been pushing for direct references to China’s steel surplus in the summit’s final communiqué.

The calls for more cuts have got louder in recent weeks, including remarks from European Commission President Jean-Claude Juncker on Sunday that it was “crucial” for output to be reduced.

European officials have also warned that China’s steel surplus could delay its efforts to secure ‘market economy status’ at the World Trade Organisation, a designation that would limit the right to challenge the Chinese over their trade policy.

Last Friday, Vice Finance Minister Zhu Guangyao countered that overcapacity is a “global problem” that needs “global actions rather than finger pointing”.

He also said that Beijing was “firmly pressing ahead” with the reduction campaign and employing “forceful means” to achieve its goals.

China’s critics argue that the steel crisis is a touchstone issue because Beijing has the power to resolve the problem. However, the politicking in advance of the summit was upended by the Indians, who objected to new proposals that the Organisation for Economic Cooperation and Development – of which neither India nor China are members – be more involved in monitoring steel production worldwide. The G20 diplomats had to settle on compromise wording in the final text that mentions the setting up of a “global forum on steel excess capacity, to be facilitated by the OECD” that reports on overproduction next year.

Cutting back the steel surplus is part of Xi Jinping’s domestic agenda, of course, but he won’t want to be seen as being railroaded by foreign governments on the issue. Instead, his remarks in Hangzhou called for respect for the circumstances of individual nations, including developing ones. Then he widened his focus to reject protectionism in all forms, insisting that China is working toward an open and integrated global economy

And the talk on the sidelines?

The dialogue on the fringes of major summits is often more important than the formal debate. And in Hangzhou the action was frenetic as the world’s leaders met one-on-one with their hosts.

Britain’s Theresa May knew she had to tread carefully on the Hinkley Point nuclear power station deal, for instance, following her unexpected decision to delay the project last month (see WiC336).

Xi was careful as well, telling May that the Chinese would be “patient” (they are a significant investor) but hinting that Beijing was open to a bilateral trade deal with London, knowing that the British are desperate for commercial accords in the wake of the Brexit decision. Less welcome: the Chinese positioned the new prime minister on the periphery when the official photo was taken of the G20 group leaders; a move likely designed to signal Xi’s displeasure at her unexpected rethink on Hinkley, and draw a contrast with the warmth in his relationship with her predecessor David Cameron.

For seasoned diplomats this is nothing new. But for May – making her first ever trip to China – it was an early experience of the carrot-and-stick approach Beijing often takes to getting what it wants.

The Australians, mind you, got an even less nuanced message. Xi spoke to an Australian delegation about Canberra’s blocking of a takeover attempt by a Chinese firm, this time for an electricity grid in New South Wales (see WiC338). According to a Foreign Ministry spokesman, Xi rebuked Malcolm Turnbull, the Australian prime minister, and asked for “a fair, transparent and predictable policy environment for foreign investors”.

Turnbull countered that it was a lot easier for the Chinese to invest in Australia than the other way around, and that his government has the sovereign right to determine who invests there.

There were differences of opinion too with Seoul on the deployment of a new missile system (see WiC316), with Xinhua reporting that Xi had warned South Korea’s Park Geun-hye that “mishandling the issue” could threaten regional stability and even intensify disputes.

Having made that remark, WiC can only imagine the Chinese mood when their troublesome neighbour Kim Jong-un made a nuisance of himself by firing three missiles into Japan’s air defense identification zone just a day later. Park and Abe Shinzo, his Japanese counterpart, got together immediately after this incident and agreed to cooperate on monitoring the situation, a Japanese statement said.

Time for change

The substance of Xi’s bilateral dialogues demonstrate how deeply China is already engaged around the world, both commercially and politically.

But Beijing wants more of a leadership role in the international institutions at a time when the Americans are distracted by their polarising presidential election, and the European Union is struggling with the implications of Brexit, as well as its refugee crisis.

The circumstances offer more of a chance for the Chinese to promote their alternative to the global order, something that they have been fashioning with their emphasis on the transformative impact of the One Belt, One Road policy, the spread of the renminbi as a global currency, and the rise of the Asian Infrastructure Investment Bank.

Looked at through the prism of trade politics, Beijing may even see the G20 as a counterpoint to the World Trade Organisation, says Francois Godemont, a director at the European Council of Foreign Relations.

He predicted in an article in Yale Global last week that the Chinese will launch a major legal challenge if they fail to secure market economy status at the WTO and become subject to damaging anti-dumping duties.

This counterstrike would see Beijing leverage its commercial ties with its partners against the trade body. But it would also focus on downplaying the importance of the WTO rules and positioning institutions like the G20 as decisionmaking alternatives.

The narrative in the domestic media was consistent with boosting the G20 and China’s position within it. The National Business Daily celebrated China’s role as a bridge between the major developed economies and developing ones, for instance, claiming that smaller countries were getting new opportunities because of China’s efforts. Kazakhstan and Egypt had been invited as special guests of the hosts, while other countries including Laos, Senegal, Chad and Thailand also turned up.

“Our thinking about the reform of the international monetary system is to have wider participation in the setting of the rules of the game,” Yi Gang, deputy governor of the People’s Bank of China, told Xinhua.

China Youth Daily then talked up the G20’s remit as “the most representative global economic governance structure”, explaining that, “the IMF and the World Bank are more reflective of the global governance ideas of the US and the European countries.”

Xi Jinping had also chosen to focus on inclusiveness in his opening address. “China’s opening up is not a solo performance, it is open to all sides to take part,” he promised. “China is not seeking its own sphere of influence but to support common development; and China is not expanding its own backyard but creating a garden for every country to share.”

In terms of the gardening metaphors, China’s neighbours might wonder how aggressively Beijing is going to seed its own lawn. But the Xi message is that the grass will be greener for everyone as the status quo changes, and it won’t just be China that benefits.

Some countries will still need to be convinced. Yet while the Chinese may share part of the responsibility for some of the world’s problems, there’s little question that they’re crucial to solving them too. Long before the G20 put the spotlight on Hangzhou last weekend, China had already taken centre-stage.

As to Obama, when he left Hangzhou there was far less of a fuss – though notably he did board Air Force One this time using a set of Chinese stairs.

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