Dual circulation – China’s new strategy in the economic showdown with the US
According to Asia Times, with the West and leading manufacturers looking to reduce their dependence on China, Beijing has changed course and is moving towards high value manufacturing.
|Chinese President Xi Jinping. Photo: THX / TTXVN|
There has also been a debate in China about retreating from globalization, but the country is aiming to find its advantage with a new economic strategy. If successful, the impact on the rest of the world can be far-reaching.
The US Administration’s continuous, multidirectional attacks have dispelled any doubts Beijing may have about President Donald Trump’s determination to “separate” the US economy from China.
Washington has attempted to cut off the business of telecom equipment maker Huawei along with the threat of delisting Chinese companies on US stock exchanges.
The message has been delivered.
In response, Chinese officials began talking about pursuing the “Dual Circulation Strategy”. This phrase seems to mean that China will make a double effort to boost domestic consumer demand and technological self-sufficiency, while continuing to benefit the best it can from it. process of globalization.
Essentially, the dual-circulation strategy aims to build domestic economic power through the rebalancing when China faces, said Bach Trang of Beijing-based economic consulting firm TS Lombard. risks increase outside.
Meanwhile, the country has maintained a deep involvement in the global supply chain. The dual circulation strategy is not a radical turnaround.
China has been trying for years to transform the growth drivers from investment and exports to household spending. As a result, total export value as a share of GDP has halved since 2007, and domestic consumption contributed nearly 60% of GDP growth in 2019.
However, private consumption in 2019 remains a staggeringly low level, accounting for only 39% of GDP, although up from 35% of GDP in 2010 but only a fraction of the 69% of US GDP. .
In addition, the dual circulation strategy emphasizes the enhancement of economic self-reliance, which is the expansion of previous strategies, including the “Made in China 2025” plan, the plan to achieve mastery of a variety of advanced technologies and the “supply side structural reform” agenda launched in 2015.
What’s new in the international context?
Chinese President Xi Jinping concluded that with growing hostility to China, the urgent need is to make the economy less vulnerable to external risks such as tariffs. US campaign and reduction of China’s access to advanced technologies.
At the moment, the COVID-19 pandemic is making the rest of the world less dependent on China. By exposing the dangers of over-reliance on several suppliers, in this case medical devices, the pandemic is driving a broader appreciation of China’s key role in supply chain.
For example, the European Union (EU) expressed concerns about the bloc’s over-reliance on China’s import of key raw materials used for the manufacture of batteries and renewable energy equipment. .
Such concerns could accelerate the trend of “repatriation” of foreign firms for some of their manufacturing activities in China. This change could initially harm the Chinese economy.
Foxconn, a giant contract electronics maker based in Taiwan (China), employs more than 1 million people in China, specifically assembling iPhone smartphones for Apple.
However, Reuters news agency reported that the company is planning to invest $ 1 billion to expand a phone factory in India and is one of the Taiwanese companies that are aiming to expand in Mexico.
Foxconn President Liu Young-way said the US-China confrontation has divided the world into “G2” and that Foxconn is working to “provide two supply chains serving two markets”. “The world’s factories no longer exist,” he stressed.
Rising wages in China are certainly pushing producers of basic goods such as textiles and footwear to move to lower cost countries such as Vietnam and Cambodia.
According to Ian Goldin, Professor of Globalization and Development at Oxford University, the uplifting of value chains, the need for personal customization and rapid delivery are encouraging manufacturers in advanced countries to move forward. return home.
The new strategy could hurt the West
With its dual circulation strategy, Chinese policymakers emphasize that this does not mean that China is turning its back on global economic integration.
However, experts Jude Blanchette and Andrew Polk of the Center for Strategic and International Studies (CSIS) in Washington said that China’s shifting focus away from mercantilism exports is fundamentally important. can reshape global trade and investment flows.
Furthermore, if the new strategy requires a deeper focus on high-value manufacturing, China may seek to replicate the German model of production. If the country succeeds, it will pose a major challenge to industrialized economies.
China’s scale of production could start to disrupt a host of new market segments – as happened with solar and lithium batteries in the past, argues Blanchette and Polk experts.