New normal of dual circulation to hasten China in opening-up to be the market for the world


PRESIDENT Xi announced recently that: “our aim is to turn the China market into a market for the world; a market shared by all, and a market accessible to all. This way, we will be able to bring more positive energy to the global community.”

China’s new development pattern is based on the domestic market as the mainstay, with internal and international markets reinforcing each other to present a more open market for domestic and global circulation.

Xi also announced an array of new measures for expanding the all-around opening-up of the country, which now has a middle-income group exceeding 400 million. As to be expected, China will nurture new pacesetters of opening up, including

(i) continue to leverage the pioneering role of pilot free trade zones and free trade ports in steering the opening-up;

(ii) introduce a negative list for cross-border services trade, and opening wider in areas like the digital economy and the Internet;

(iii) deepen reform and innovation in trade and investment liberalisation and facilitation, and make institutional innovations support an open economy of higher and higher standards;

(iv) encourage cross-border e-commerce and other new business forms and models to grow even quicker, to foster new drivers of foreign trade;

(v) shorten its catalog of technologies prohibited or restricted from import to create a favourable environment for the free flow of technologies across borders;

(vi) keep improving its business environment; and

(vii) pursue deeper bilateral, multilateral and regional cooperation, including early signing of the Regional Comprehensive Economic Partnership, and speeding-up negotiations on an investment treaty with the European Union, and a free trade agreement with Japan and the South Korea.

In addition, China will work to further promote high-quality Belt and Road cooperation and build a community with a shared future for mankind.

Dual circulation

Over recent years, China has developed the world’s largest middle-income population and is set to end absolute poverty, which has haunted the nation for thousands of years. Signs over the past five years have shown that China’s development has entered a new stage – steering, and leading the new normal of economic development.

As I understand it, the new vision for development features innovative, coordinated, green and open development. It will foster a new “dual-circulation” development pattern, which focuses on the domestic market as the country’s economic mainstay, with internal and foreign markets complementing each other.

The pattern marks a major move for new development, enshrined into the framework of the new 14th Five-Year Plan. It highlights China’s new solution to coordinate domestic development and to further open-up. The first five years on the country’s journey toward building a modern socialist country by 2049, will help China build a complete domestic supply-and-demand system to meet the people’s growing need for a better life.

Domestically, China will focus on meeting people’s needs as well as boosting technological innovation to create new engines of growth. On the external side, China will continue to expand opening-up, and build an open economic system at higher levels. Under the new development pattern, China will open its doors wider to the outside world, instead of simply seeking self-sufficient domestic development. More effort will be made to boost domestic demand, spur consumer buying, open more industries – including finance – to foreign investors, and gain a key edge in global competition.

After years of development, China is now moving forward, from the phase of relying more on international economic networks to a new stage of domestic and international economic networks complementing each other. Also, China now has the preconditions to build new development modes with the support of its extra-large domestic market, strong innovative capability, adequate funding, complete industrial support system, and sufficient skilled human resources.

At home, the Chinese leadership has been working to shore up weak links involving people’s livelihoods. At the end of 2015, China had more than 54 million rural residents living in poverty. By the end of 2019, China’s poverty headcount ratio had dropped to 0.6%. The country is now in the final stretch of its plan to eradicate extreme poverty.

During the 13th Five-Year Plan period ended 2020, China rolled out a slew of measures to address people’s concerns: More than 60 million new urban jobs were created; over 50 million urban residents moved from unsuitable housing to new homes; nearly 30 million elderly people were provided with old-age care subsidies; and in the nine-year compulsory education stage, the number of dropouts due to poverty fell to zero. The average life expectancy of the Chinese people reached 77.3 years as of the end of 2019. More than 95% of the population is covered by basic health insurance plans.

In 2020, China was among the first countries to bring Covid-19 under control; resume work, and reopen schools and businesses. The next five years will usher China into a new phase of development. It will be the first five years of the country’s new journey toward fully building a modern socialist country. The goals set by the new 14th Five-Year Plan (2021-2025) for economic and social development will result in a very large rise in China’s total GDP as well as its domestic consumer market. The key long-term goal is to become a moderately developed nation within just 15 years, by 2035.

This means that China would become a high-income nation, rising beyond its current status as an upper-middle-income developing country as defined by World Bank income thresholds for countries worldwide. This will reinforce the “dual circulation” strategy of significantly increasing consumption expenditure, and making consumer spending an increasingly important contributor to annual GDP growth.

China will continue moving towards modernisation; further open up its economy, and advance its pursuit of yuan internationalisation. Being able to put a focus on developing the domestic market also means that China has realised its goal of developing a xiaokang (moderately prosperous) society to support dual circulation. It indicates China’s determination for better self-development.

In a broader context, the move adheres to innovation, which is at the core of China’s modernisation, technological self-reliance, and the strategy of building a modern scientific and technological power.

China needs to better cope with short-term risks amid the Covid-19 pandemic by building more independent and controllable industrial and supply chains, and forge new cutting-edge technologies. Improving China’s industrial chain is not just to cushion the outbreak’s fallout on manufacturing; but a foundation for the nation to better pursue the new dual-circulation development pattern (with the domestic market as the mainstay and the local and foreign markets boosting each other).

The risks of the manufacturing supply chains are mainly derived from some developed countries’ aim to contain China’s technological development, in the face of its economic rise. The US government, for instance, has put dozens of Chinese tech companies (including Huawei Technologies and Semiconductor Manufacturing International Corp) on an “entity list”, which restricts their access to advance US technologies, such as crucial software and semiconductor equipment. This means that the latecomer advantage of leveraging some of the most advanced international technologies to fuel its own rapid development no longer exists.

This highlights the urgent need to beef-up industrial chain capabilities. That is, intensifying efforts to purse homegrown breakthroughs in critical technologies. It also means focusing on bolstering its capabilities in key technologies, and even more efforts to be made to embrace the globalisation of other industrial parts and technologies. Cooperative mechanisms will also have to be established for upstream and downstream enterprises in industrial chains, to ensure the smooth operation of the domestic and foreign companies in China.

Overall, the epidemic has once again made China realise how important it is to become a smart manufacturing powerhouse.

What then are we to do

China is set to mark 100 years since the Communist Party of China (CPC) was established. The CPC has been central to the development of China, the first developing country to achieve the United Nations Sustainable Development Goal on poverty eradication. It was the great Chinese strategic thinker Sun Tsu who said: “For to win one hundred battles is not the acme of skill. To subdue the enemy without fighting is the acme of human skill”.

As China becomes more powerful, there will be additional pressure to deliver a better quality of life for its citizens. This means keeping the trajectory of socioeconomic transformation, not just to completely climb out of poverty, but also ensure that inequality is reduced so there is more inclusive growth.

China was the only major economy to see positive growth in 2020. This year, I think its economy will grow by 7 to 8% – fostering continuing recovery within the domestic economy, and promoting global economic regeneration. Through successes of the Belt and Road Initiative (BRI), China shares the proceeds of its development with the rest of the world on the five pillars of: infrastructure connectivity; policy coordination; financial inclusion; trade; and, people-to-people exchange.

The BRI is just one of the many avenues by which China dwells in international cooperation, and where peace and development take precedence over confrontation and protectionism. This commitment is expressed in the popular proverb: “Good boys do not become soldiers; good iron is not used to make nails”. Undoubtedly, the sharing of this wisdom will help to generate an even more peaceful world.

I regard this as one great opportunity that has surfaced for us in Malaysia, from the renaissance of Chinese civilisation.

Former banker, Harvard educated economist and British Chartered Scientist, Prof Lin of Sunway University is the author of “Trying Troubled Times Amid Trauma & Tumult, 2017-2019” (Pearson, 2019). Feedback is most welcome. The views expressed here are the writer’s own.

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 46
Cxense type: free
User access status: 3
Join our Telegram channel to get our Evening Alerts and breaking news highlights

What are we to do?

   

Next In Business News

MUI Group's PMC to buy 51% stake in A&W Malaysia
Yinson reports third straight quarterly earnings growth
KPower posts RM37.4mil net profit in FY21, despite Covid-19 setbacks
FBM KLCI broadly higher on bargain-hunting activities
BNM's international reserves at US$116.2bil as at Sept 15
China stocks end higher, Evergrande's assurances lift real estate firms
Maybank, UOB to jointly underwrite RM2bil Islamic facility for Malayan cement
DFIs provide micro-SMEs with financing totalling RM8.1bil
Oil prices rise on tight supply, renewed risk appetite
Citi Malaysia bags multiple banking awards

Stories You'll Enjoy


Vouchers