G8 powers face up to changing economic balance

By Brian Love, European Economics Correspondent

HEILIGENDAMM, Germany (Reuters) - Some thirty years on, the G8 group of industrialized economic powers acknowledged in essence on Friday that the world is no longer one they can shape without consulting the likes of China.

Launching what they called the Heiligendamm Process, leaders of the G8 club said they wanted to establish a permanent system of policy consultation with some of the new or coming big hitters of the global economy, such as China, India and Brazil.

The Organization for Economic Co-operation and Development, a forum that promotes free-market economics and good governance, got the job of making the idea work. G8 leaders said they would weigh up how successful the project was two years from now.

What exactly the mission entails or can achieve was not very clear, according to officials present at the G8 summit in the German resort of Heiligendamm where the decision was taken.

But the case for adapting the G8 to a rapidly changing world where China is the fourth largest economy, while not a member of the G8 club, was obvious before the leaders even met for their 33rd annual summit.

"Is this structure still adapted to the economic world that has been transformed in the past 30 years by growth and globalization?" asked Valery Giscard d'Estaing, a French former president who created what is now the G8 back in 1975.

In recent years, global economic growth has had its best run in 30 years but much of the credit goes to countries which did not figure economically when Giscard started the ball rolling -- notably China with its growth rate of more than 10 percent per year, far above that of the long-industrialized economies.

JOINING THE PARTY

On Friday, as for several years now, the president of China and the other big emerging market economies came to the summit to confer, briefly though symbolically, with the leaders of the G8 -- the United States, Japan, Germany, Britain, France, Italy, Canada, and since more recently, Russia.

China's Hu Jintao and India's Manmohan Singh, leaders of the world's two most populous countries, were the stars of what the G8 likes to calls the "outreach" initiative, and summit host Angela Merkel spent extra time sipping water with them in the gardens of the luxury hotel where the meetings took place.

There was no mention, by name, of China as one of the main causes of economic concern for people like U.S. President George W. Bush, whose government along with Europe wants to see China's currency rise in the name of fairer trade competition.

"Against the background of our respective responsibilities, common solutions need to be developed," the leaders said in a statement released from their three-day summit.

"Both the G8 countries and the major emerging economies have the chance to define a new partnership responding to these world economic challenges."

FIRESIDE CHATS

Angel Gurria, the head of the Paris-based OECD, was once