context: While the PRC has seen unprecedented economic growth in the past three decades under an export-led economic regime, recent events have prompted Beijing to consider the security and stability of the domestic economy. A major component of the current PRC economic strategy is 'dual-circulation', which describes an effort to strengthen the domestic market and protect it against external shocks while remaining engaged in international trade. As the PRC faces both opportunities and challenges in its growth, it must carefully consider the degree to which it is exposed to foreign risk and volatility to safeguard its interests.
Tu Xinquan 屠新泉 University of International Business and Economics WTO Research Institute director shares their perspective on dual circulation
- historical context
- Tu remarks that the model has played a key role in the PRC’s growth by opening access to global markets and bringing major gains
- in the beginning of the opening-up era, participating in the international circulation was a top priority
- however, since the 2008 financial crisis, focus has shifted towards the domestic economy
- as the PRC’s production capacity increased, it was able to manufacture more goods it once depended on other countries for
- Tu remarks that the model has played a key role in the PRC’s growth by opening access to global markets and bringing major gains
- dual circulation’s aims
- Tu notes that on the supply side, dual circulation focuses on addressing self-sufficiency and eliminating tech bottlenecks
- particular focus on diversifying supply chains to reduce dependency on US high technologies
- on the demand side, it focuses on reducing dependence on the US market by diversifying into other global markets and increasing domestic demand
- reducing dependence on US market is done through overseas investment and foreign trade cooperation
- Beijing’s drive to boost domestic demand relies on three fronts
- raising household income
- narrowing income inequality
- urging SOEs to remit more profits back to the centre
- part of the remitted income can be used to supplement income security and social security
- Tu notes that on the supply side, dual circulation focuses on addressing self-sufficiency and eliminating tech bottlenecks
- dual circulation in practice now
- PRC 'dual-circulation' strategy implemented in the backdrop of the PRC–US trade war 1.0 has made significant progress
- however, Tu notes that focusing on the domestic economy does not mean withdrawing from the international market
- the PRC should leverage its industrial advantages to expand more modes in international circulation
- e.g. PRC advanced manufacturing and high-tech products can embed themselves further in the global industrial chains
- international circulation needs to synergise with domestic circulation to promote growth
- the PRC should leverage its industrial advantages to expand more modes in international circulation