tonight! At the special summit at a special time, can the G20 "lift" the world economy again?

Twelve years ago, the leaders of the Group of 20 (G20) faced a daunting task when they met for the first time-to "salvage" the global economy from a financial tsunami that had not been encountered for decades. In the end, they succeeded.

Twelve years later, another global crisis is coming, and the G20 is once again placed on high hopes.

On the 26th, Beijing time, the G20 leaders will hold a special summit to cope with the new crown pneumonia. This is a special summit of the epidemic at a critical moment in multiple global outbreaks. What's special is that for the first time in G20 history, a summit of leaders was held in video.

Unprecedented pressure on global economy under epidemic

According to the real-time epidemic data released by Johns Hopkins University in the United States, as of 16:06 Beijing time on March 26, the cumulative number of confirmed cases worldwide has exceeded 470,000, reaching 472,790 cases; the cumulative deaths have exceeded 20,000, reaching 21313 example.

As the epidemic continues to escalate, the global economy is also under unprecedented pressure.

The International Finance Association recently released a report saying that the global economy will show a negative growth rate of 1.5% in 2020. This is the third time the agency has lowered its global economic growth forecast. Among them, advanced economies will shrink by 3.3%, and emerging economies can only grow by 1.1%.

The president of the International Monetary Fund (IMF), Georgiyeva, also said recently that due to the impact of the epidemic, the global economy will fall into negative growth in 2020, and the degree of recession will be at least equal to or even more severe than that of the 2008 financial crisis.

The G20, which was born in response to the crisis, is bound to come forward.

Looking back at the 1997 Asian financial crisis, not only did some major Asian economies begin to stagnate as a result, but it also drove all-round violent fluctuations in the stock markets and foreign exchange markets of the United States and Europe. To prevent similar financial crises from repeating themselves. The then G8 finance ministers announced the establishment of the G20 in Washington, DC on September 25, 1999. After the outbreak of the international financial crisis in 2008, the G20 was upgraded to a summit of leaders in response to this unprecedented crisis.

It is worth mentioning that the composition of G20 members takes into account the balance of interests of developed and developing countries and different regions. The population accounts for 2/3 of the world, the land area accounts for 60%, and the GDP accounts for 85%.

Because of its broad representation and influence, and the shadow of the recession in developed countries after 2008, emerging countries with rapid economic development have become an important force to revitalize the world economy. The G20, which is more representative of the global economic structure, has gradually surpassed the Group of Seven (G7). Become the premier international economic governance platform.

Chinese Deputy Foreign Minister Ma Zhaoxu said that at this critical moment, the G20 specifically held a summit on the new crown pneumonia epidemic, and it is of great significance to communicate and coordinate the response to the spread of the epidemic and stabilize the world economy.

What is the difference between the two crises?

In responding to the 2008 international financial crisis, the role of the G20 cannot be ignored.

At the G20 leaders ’Washington summit held in November 2008, members reached an action plan to deal with the financial crisis, including emergency measures to support the global economy and stabilize financial markets, strengthen financial supervision, and oppose protectionism. From this meeting, the G20 began to play a real and substantial role in coordinating national policies and responding to the financial crisis.

However, the difficulties facing the global economy today are not exactly the same.

Xing Ziqiang, chief economist at Morgan Stanley China, believes that the current round of global economic recession is unavoidable, but overall the possibility of causing a systemic financial collapse is low. Mainly because the financial tsunami was caused by the global spread of the epidemic, if the epidemic can be controlled in the end, its impact on the economy will still be relatively short-term. This is different from the systemic and long-term imbalances in the global economy before the 2008 international financial crisis.

But at the same time, the policy space for all parties is also more limited than 12 years ago.

Looking at the cards recently played by major global economies, represented by the Federal Reserve ’s continuous emergency interest rate cuts and unlimited quantitative easing, “opening the gate to release water” is still the main method.

However, some analysts pointed out that before the outbreak of the outbreak, the global economy was already weak, and trade tensions and the "Brexit" of the United Kingdom have greatly reduced growth prospects. In the current global "low-interest-rate era" and the prevention and control of epidemic situations, the effects of policies such as interest rate cuts to boost the economy will be very limited, and even the price of "side effects" will be paid.

Li Qilin, chief economist of Yuekai Securities, said that after the 2008 financial crisis, major countries joined hands to cope with the crisis. However, 12 years have passed. Currency easing has not fundamentally solved the dilemma of insufficient global demand and lack of growth momentum. Instead, it has created a series of new problems such as global debt expansion, the widening gap between rich and poor, and the rise of anti-globalization waves.

Zhang Ming, director of the International Investment Research Office of the Institute of World Economics and Politics of the Chinese Academy of Social Sciences, also analyzed that the four developed economies of the United States, the euro zone, the United Kingdom, and Japan may soon enter a state of zero or even negative interest rates. As traditional policy space is on the verge of disappearing, monetary policy has no alternative but quantitative easing.

In short, the effect of the easing of monetary policy by all parties is no longer than before, and there are very few "bullets" left.

Global coordinated fiscal stimulus is expected

The operating space of monetary policy is limited, and the ability to coordinate and launch fiscal stimulus policies around the world has become the focus of attention of all parties.

IMF President Georgiyeva said that as the epidemic spreads, it is necessary to take coordinated and synchronized global fiscal stimulus. For example, after the outbreak of the international financial crisis, the fiscal stimulus implemented by the G20 in 2009 alone accounted for about 2% of its GDP, equivalent to more than $ 900 billion today. Therefore, much work remains to be done.

UN Secretary General Guterres also called on G20 leaders to urgently launch a trillion-dollar stimulus plan to minimize the economic and social impact of the epidemic. He said that by the end of this year, the losses caused by the new crown epidemic will be trillions of dollars. The G20 must respond accordingly and inject significant resources into the economy.

Against this background, the chief analyst of fixed income of CITIC Securities clearly expected that this round of G20 summit may reach more consensus on fiscal policy.

He gave three reasons: first, this round of liquidity crisis has not been transformed into a comprehensive debt crisis, and central banks' easing policies have been introduced in a more timely manner; second, this round of global monetary policy has fallen more into the non-traditional range, and currency The marginal effect of easing has gradually weakened, and the demand for fiscal expansion has become stronger. Third, the euro area's rejection of fiscal expansion is no longer intense, and the call for fiscal expansion cooperation within the European Central Bank has become stronger.

However, increasing fiscal stimulus comes at a price.

Zhu Min, Dean of the National Institute of Finance, Tsinghua University, said that fiscal policy is particularly important in restoring the economy. Tax reductions, subsidies, and cash for residents all require a lot of financial funds. However, since the 2008 financial crisis, government debt in developed countries has increased by an average of 50%, and government debt in developing countries in emerging economies has also increased by 30%. Governments in all countries have limited fiscal stimulus economic space.

Northeast Securities chief economist Fu Peng pointed out that at present, the fiscal policy ideas of countries to rescue the city are mainly to break through fiscal deficit restrictions, or even to break certain constitutional constraints, and use extraordinary measures to deal with shocks. However, this may lead to a new high government debt to GDP after the epidemic, and fiscal revenue growth may not be able to recover in a timely manner.

Faced with another global crisis and a series of constraints, it will be to be seen whether the G20 will once again "salvage" 12 years ago to slip into the world economy of recession abyss. (Author: Wangen Bo)