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Chinese Premier Hu Jintao abandoned plans to attend the summit amidst rioting in the restive province of Xinjiang. Xinjiang is a resource-rich region and makes a significant contribution to energy security according to analysts cited by the South China Morning Post. Xinjiang sits atop as much as 20% of domestic oil reserves and is expected to account for one-fifth of the mainland's annual coal output reports MNI. Hu's departure should mean no serious discussion on a new reserve currency and no additional heavy push for developing countries to have larger voice at IMF.
The G8 have already leaked out their statement to Reuters and it contains no shockers. As most readers know, the key items in a G8 summit are negotiated months in advance and rarely contain any sudden shifts in well established positions. The G8 are expected to say that the global economic recovery is not yet guaranteed and governments will worry about the bill for heavy stimulus spending once it has succeeded. "While there are signs of stabilization, including recovery in stock markets...the situation remains uncertain and significant risks remain to economic and financial stability....We agreed on the need to prepare appropriate strategies for unwinding extraordinary measures once the recovery is assured....Exit strategies will vary depending on economic conditions and public finances."
They did mention that stable and sustainable long-term growth will require a smooth unwinding of existing imbalances in current accounts. This is a veiled way of saying that the current structure of the Far East exporting to the West needs to change. There must be a shift away from promoting exports as the engine of growth towards increasing domestic consumption and demand.
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How does a country do that? Increasing the purchasing power of the domestic currency by allowing it to strengthen goes a long way towards accomplishing this goal. Also, governments need to increase the social safety net, increase paying for health care, and increase paying for education to get consumers in those countries willing to reduce their massive savings rates and feel comfortable consuming more. Also, the Henry Ford theory of raising wages to allow each worker to buy the output of the factory isn't a bad idea either.
While the Far East of Russia, China, and others may have animosity towards the West and specifically the United States economic hegemony, they are the masters of their own universe. They can move away from the US dollar as the world's reserve currency if they take steps to move away from the export model of economic growth for their countries. Unbeknownst to them, they have all the power they need to make the changes now. The will to do so is another matter.
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