By Hu Shuli

The spotlight that focused on the U.S. presidential election and Barack Obama’s historic victory is shifting to an event that has the potential to shape the future of the world -- the G20 financial summit in Washington on November 15.

This is the first opportunity for policy discussions among leaders of the world’s most important economies since the credit crisis began. While one should not fantasize about summit solutions to the crisis, any multilateral consultation will be significant. It is reasonable to expect this summit to be a starting point for building a consensus and forging action plans. Chinese President Hu Jintao will attend the summit, taking a pro-active step after what a foreign ministry spokesman described as the president’s “positive consideration.”

This summit, set against the backdrop of a widening global financial crisis, is evidence that globalization is irreversible. The crisis is fundamentally unlike the Great Depression of 1929-’33, when each country could mind its own business. Today, all find themselves in the same boat. A prelude to the summit was the concerted activity of major central banks over the past several months. Interdependence among the world’s economies is a reality, no matter how often globalization is blamed for the crisis or what the individual agendas of major players. The objective of the G20 summit is to find a way out of the financial meltdown and fight the global recession. This alone is an effect of globalization. Like it or not, this is a time for critical decisions.

Once recognizing this reality, we can clearly see China’s role. No economy can escape the financial crisis and China, as a major beneficiary of globalization, is no exception. Initially, emerging economies were on the periphery when the crisis started on Wall Street. But now a serious challenge is approaching. China faces a gloomy outlook. The International Labor Organization recently estimated that worldwide unemployment could rise to 210 million in 2008 from 190 million in 2007. An unprecedented jump in joblessness would portend a continuing or even accelerating slide for Chinese exports. In China, falling investment has already cast a pall on employment.

Overall, China’s economic performance could help the country weather the storm, but the pain may be severe. With this in mind, there is no difference between the savior and the saved. And there is no room for bystanders. For China, pro-active participation in international coordination could help mitigate the financial crisis and build confidence in the global economy, which in turn could reduce the impact of overseas markets on China’s sliding economic growth and rising unemployment. The prospects would be mutually beneficial.

To be sure, China is a developing country; it can only tackle the financial crisis in concert with other economies, similar to the shared position of “common but differentiated responsibilities” on global climate change. Common responsibility for the global markets of finance and tradable goods brought China benefits as well as risks. Only through joint efforts to mitigate risks can we survive the crisis. Differentiated responsibility means that individual countries should build their own financial systems and market oversight bodies to take appropriate policy action according to the impact of the crisis on each economy.

China must apply lessons from the financial crisis to improve its own financial system, step up banking reform, fine-tune its capital market, and strengthen financial system oversight. China’s real economy will continue to grow and function as an economic catalyst that helps the world emerge from the crisis. By expanding domestic demand to boost consumption, upgrading its industries and encouraging urbanization to ensure middle class growth while doubling gross income of its 730 million rural residents, China’s GDP will likely continue growing at a 10 percent annual rate for the next five to 10 years. It will provide the market for global overcapacity and a safe haven for capital. With all these, China will act as a seawall to fend off a global financial and economic crisis over the next two years.

China is not shirking its responsibilities in the international community. At present, its most realistic course of action for fixing the global financial market is to make funding facilities available to developed economies. Sitting on US$ 1.9 trillion in foreign reserves, policy makers are fully aware of their unique position as a major creditor. They should know that any adjustment in the currency mix or even a slight reduction in debt holding can reduce the value of these foreign exchange reserves. Only by keeping the debt and currency mix stable can confidence be strengthened among global investors in the money and capital markets, which in turn will ensure the safety of assets in China’s foreign reserves.

Since the crisis broke out, leaders from government, industry and academia have mulled over coordination and oversight mechanisms for international financial markets. Although no detailed blueprint is on the table, many proposals for building a new Bretton Woods system have emerged. China can promote changes in the International Monetary Fund, such as balancing quotas and member votes so the organization plays a more significant role in financial and monetary stability. China can also speed up currency reform by letting the market set the international exchange rate of the yuan. It can gradually modify the mechanism of currency valuation in external trade to make the yuan a regional and international currency. The Chinese monetary authority should work in concert with the U.S. Federal Reserve Board, European Central Bank, Bank of Japan, and IMF framework to usher in a new Bretton Woods system – that is, a new international monetary framework conducive to global financial stability.

The financial crisis does not signal the failure or end of globalization. While solving the crisis, governments are building an international cooperation mechanism, which will provide institutional guarantee for deeper and more extensive economic and financial globalization, while strengthening resistance to future crises. A new wave of globalization will follow in the wake of the current crisis. The opportunity that comes with the danger is here and now.