Steven A. Tananbaum Senior Fellow for International Economics Robert Kahn argues that the case for strong and effective Group of Twenty (G20) leadership is as compelling as ever. But if the G20 is to be as effective in noncrisis times as it was in 2008–2009, it needs stronger Chinese leadership, working informally yet closely with the United States—a Group of Two (G2) within the G20. Debt policy is one area where China and the United States should cooperate this year.

Steven A. Tananbaum Senior Fellow for International Economics Robert Kahn argues that China's growth prospect lies somewhere between hard-landing and muddle-through scenarios. However, uncertainty remains and is already being felt strongly and likely to put increasing pressure on emerging markets through trade contraction and financial contagion. For the United States, fragility in emerging markets is the critical risk and will dominate economic decision-making for months if not years to come.

Bottom Line: In the face of uncertain capital flows, an international network of swap lines would help to ensure adequate liquidity and act as a significant enhancement of the global financial safety…