This weekend’s gathering of leaders of 20 of the world’s biggest economies didn’t yield a clear-cut solution to the global financial crisis. It did, however, signify a fundamental shift to a world where emerging economies like Brazil, India and China wield greater influence than ever before.
Of these, China is certainly the biggest. With $1.9 trillion in foreign exchange reserves, China is being courted to contribute funds to the International Monetary Fund to be used for emergency loans for struggling countries. China has made no promises yet, preferring instead to focus on its own economy with a $590 billion stimulus plan. Whether China agrees to contribute to the IMF or not, there’s no doubt that the country is poised to play a much larger role in global economic decision-making.
The breadth of China's role could depend on its ability to keep its own economy chugging along. A UN-sponsored report released over the weekend suggests China’s widening gulf between the country’s rich and poor threatens to undo recent economic gains by reducing consumer spending and productivity.
China’s stimulus package, with a focus on low-income housing and rural infrastructure, may help to shrink these growing inequalities. Since more than ever the world is looking to China to provide economic stability, they can’t afford to get this wrong.