Page 7 - THE SOUTH CHINA BUSINESS JOURNAL
P. 7
May this year, when China just caught its strategy. As the tide of globalization grew in strength,
breath from the COVID-19 outbreak and Western China grabbed the many opportunities in its wake.
countries began to flounder, Chinese president Xi Relying on the abundance of cheap Chinese labor
Jinping proposed a new economic model – the “dual and the country’s strong business ecosystem, lack of
circulation strategy” (DCS) at a Politburo meeting. regulatory compliance, and low taxes and duties –
Though the DCS would come to be more frequently China quickly became the “world’s factory”, center
invoked by the Chinese leadership in later meetings, of the world’s supply chain for many industries, and
it stirred up much discussion among China market achieved what is now referred to in haloed tones as
watchers due to the absence of concrete details. the continuous rapid growth miracle of the Chinese
This article will briefly explain what the DCS actually economy.
means, why China is pushing for it now, what
changes can be expected, and what will be the policy’s The 2008 global financial crisis would soon expose
implications for foreign investment. the Chinese fast-growing economy to the fragility of
the export-led economic model, prompting Chinese
What is the dual circulation strategy? policymakers to rebalance growth towards cultivating
The “dual circulation” strategy (DCS) is a two-pronged and supplying domestic demand. In addition, there
development strategy that seeks to spur China’s was an important realization – the export-oriented
domestic demand in addition to catering to export trade pattern where Chinese businesses import
markets and will create conditions that allow domestic raw materials to process and then export to foreign
and foreign markets to boost each other. markets – had locked China into the middle order of
the global value chain.
The strategy is slowly becoming the underlying policy
refrain to accompany China’s actions to recoup loss of To achieve sustainable growth and move beyond the
growth momentum due to the coronavirus outbreak. limitations holding back its economic expansion,
Some analysts, however, assume that this is a signal China began rolling out consistent economic reforms
that China’s economy will look inward and reduce its over the past decade, including supply-side structural
exposure to the vagaries of the global economy. reform in 2015 and Made in China 2025 announced
in 2018. The ultimate goal has been to shift itself from
Why is DCS being pushed by China now? being an “export and investment-led” economy to a
Many analysts see China’s DCS as a quick and passive “demand and innovation-driven” economy.
response to the unpredictability in global markets. In
fact, the dual circulation strategy also follows China’s From 2006 to 2019, the trade-to-GDP ratio of China
long-held goal of rebalancing its economy. slid from 64.5 to 35.7 percent. However, while overall
investment jumped, the portion of domestic private
In the 1980s, China’s former leader Deng Xiaoping consumption only marginally arose, stabilizing at 38.8
first adopted the ‘reform and opening-up policy’ and percent of GDP in 2019 – barely higher than a decade
began implementing an export-oriented development earlier.
SOUTH CHINA BUSINESS JOURNAL 4
breath from the COVID-19 outbreak and Western China grabbed the many opportunities in its wake.
countries began to flounder, Chinese president Xi Relying on the abundance of cheap Chinese labor
Jinping proposed a new economic model – the “dual and the country’s strong business ecosystem, lack of
circulation strategy” (DCS) at a Politburo meeting. regulatory compliance, and low taxes and duties –
Though the DCS would come to be more frequently China quickly became the “world’s factory”, center
invoked by the Chinese leadership in later meetings, of the world’s supply chain for many industries, and
it stirred up much discussion among China market achieved what is now referred to in haloed tones as
watchers due to the absence of concrete details. the continuous rapid growth miracle of the Chinese
This article will briefly explain what the DCS actually economy.
means, why China is pushing for it now, what
changes can be expected, and what will be the policy’s The 2008 global financial crisis would soon expose
implications for foreign investment. the Chinese fast-growing economy to the fragility of
the export-led economic model, prompting Chinese
What is the dual circulation strategy? policymakers to rebalance growth towards cultivating
The “dual circulation” strategy (DCS) is a two-pronged and supplying domestic demand. In addition, there
development strategy that seeks to spur China’s was an important realization – the export-oriented
domestic demand in addition to catering to export trade pattern where Chinese businesses import
markets and will create conditions that allow domestic raw materials to process and then export to foreign
and foreign markets to boost each other. markets – had locked China into the middle order of
the global value chain.
The strategy is slowly becoming the underlying policy
refrain to accompany China’s actions to recoup loss of To achieve sustainable growth and move beyond the
growth momentum due to the coronavirus outbreak. limitations holding back its economic expansion,
Some analysts, however, assume that this is a signal China began rolling out consistent economic reforms
that China’s economy will look inward and reduce its over the past decade, including supply-side structural
exposure to the vagaries of the global economy. reform in 2015 and Made in China 2025 announced
in 2018. The ultimate goal has been to shift itself from
Why is DCS being pushed by China now? being an “export and investment-led” economy to a
Many analysts see China’s DCS as a quick and passive “demand and innovation-driven” economy.
response to the unpredictability in global markets. In
fact, the dual circulation strategy also follows China’s From 2006 to 2019, the trade-to-GDP ratio of China
long-held goal of rebalancing its economy. slid from 64.5 to 35.7 percent. However, while overall
investment jumped, the portion of domestic private
In the 1980s, China’s former leader Deng Xiaoping consumption only marginally arose, stabilizing at 38.8
first adopted the ‘reform and opening-up policy’ and percent of GDP in 2019 – barely higher than a decade
began implementing an export-oriented development earlier.
SOUTH CHINA BUSINESS JOURNAL 4
