Geographies in Depth

Explainer: What we know about China's 'dual circulation' economic strategy

A woman works on gun cases in a factory of firearm equipment manufacturer Yakeda Tactical Gear Co, which exports most of its products to the United States, in Guangzhou, Guangdong province, China June 1, 2019. Picture taken June 1, 2019. REUTERS/Jason Lee? - RC11B43C1550

The new model will reduce reliance on external markets. Image: Reuters/Jason Lee

Kevin Yao
Journalist, Reuters
Share:
Our Impact
What's the World Economic Forum doing to accelerate action on Geographies in Depth?
The Big Picture
Explore and monitor how United States is affecting economies, industries and global issues
A hand holding a looking glass by a lake
Crowdsource Innovation
Get involved with our crowdsourced digital platform to deliver impact at scale
Stay up to date:

United States

  • China is working towards becoming a more independent economy, by introducing a 'dual circulation' model.
  • Chinese President Xi Jinping said the country would rely mainly on “internal circulation” - the domestic cycle of production, distribution, and consumption - for its development.
  • This will be supported by "external circulation".

China has unveiled a “dual circulation” strategy to cut its dependence on overseas markets and technology in its long-term development, a shift brought on by a deepening rift with the United States.

What is the dual circulation model?

Chinese President Xi Jinping first raised the idea in May and later elaborated that China will rely mainly on “internal circulation” - the domestic cycle of production, distribution, and consumption - for its development, supported by innovation and upgrades in the economy.

Xi also said “internal circulation” will be supported by “external circulation”.

No further details have been announced on the strategy.

Have you read?

Three decades ago, former leader Deng Xiaoping adopted a “great international circulation” strategy, but the 2008-09 global crisis exposed the vulnerability of the export-led model and prodded policymakers to rebalance growth towards domestic demand.

The “dual circulation” strategy could become a key priority in the government’s 14th five-year plan (2021-2025), due to be unveiled during the annual parliament session in early 2021.

Domestic cycle

To jump-start “internal circulation,” China needs to boost household incomes and consumption.

Key would be its ongoing urbanisation programme to turn millions of migrant workers into city dwellers to expand China’s middle class. About 60% of China’s population live in urban areas.

China United States Geo-economics
China's recovery in consumption has lagged behind production amid job losses and economic uncertainties. Image: National Bureau of Statistics

China is already a “hyper-sized” consumer market with 1.4 billion people. Its rapidly growing middle class is at least over 400 million strong.

So far this year, the recovery in consumption has lagged behind production amid job losses and economic uncertainties brought about by the coronavirus pandemic.

Supply chains

China has boasted the most complete manufacturing supply chains in the world, helped by foreign companies.

But tension with the United States has exposed China’s vulnerability as it relies heavily on U.S. high-tech products, such as semiconductors, forcing Beijing to spur domestic innovation in efforts to secure domestic supply chains.

Under the “dual circulation” strategy, Xi aims to boost tech innovation and push Chinese firms up the global value chain, key to globalising China’s home-grown companies, boosting household incomes, and in turn, stimulating domestic demand.

Chinese leaders still advocate greater market opening to attract more foreign investment in high-end manufacturing to strengthen its supply chain security and deter foreign countries’ from luring firms away from China.

Loading...
Loading...
Don't miss any update on this topic

Create a free account and access your personalized content collection with our latest publications and analyses.

Sign up for free

License and Republishing

World Economic Forum articles may be republished in accordance with the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License, and in accordance with our Terms of Use.

The views expressed in this article are those of the author alone and not the World Economic Forum.

Related topics:
Geographies in DepthGeo-Economics and Politics
Share:
World Economic Forum logo
Global Agenda

The Agenda Weekly

A weekly update of the most important issues driving the global agenda

Subscribe today

You can unsubscribe at any time using the link in our emails. For more details, review our privacy policy.

Asia-Pacific: How the region is prioritizing a green economy

Kanni Wignaraja and Debora Comini

June 10, 2024

About Us

Events

Media

Partners & Members

  • Join Us

Language Editions

Privacy Policy & Terms of Service

© 2024 World Economic Forum