China’s economic strategy shift shows Xi Jinping is preparing for ‘worst case scenario’, analysts say

The Chinese president said that Beijing was pursuing a new development plan, focusing on its domestic market rather than an export-led growth model

China’s economy is under pressure from the coronavirus, as well as escalating trade war and technology tensions with the United States

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Chinese President Xi Jinping spoke to dozens of top economic advisers in Beijing at the weekend as part of the annual “two sessions”. Photo: EPA-EFE

Published: 10:00pm, 25 May 2020Updated: 9:17am, 28 May 2020

China’s move to double down on a pivot away from export-led growth in favour of developing its domestic market reflects a strategic shift by Beijing to prepare for the “worst case scenario” after the coronavirus pandemic, according to analysts.

President Xi Jinping told dozens of top economic advisers in Beijing at the weekend that China was pursuing a new development plan in which “domestic circulation plays the dominant role”.

“For the future, we must treat domestic demand as the starting point and foothold as we accelerate the building of a complete domestic consumption system, and greatly promote innovation in science, technology and other areas,” Xi said in comments published by the official Xinhua News Agency.

Xi’s remarks suggest that Beijing is moving towards giving up the “great international circulation” strategy adopted in the 1990s that helped fuel its growth to become the world’s second-largest economy.

It’s a kind of preparation for the worst-case scenario, including the decoupling with the United States and even the whole western world

Hu Xingdou

“It’s a kind of preparation for the worst-case scenario, including the decoupling with the United States and even the whole Western world,” said Hu Xingdou, a Beijing-based independent economist.

Hu said China has no choice but to face the adversity, but warned that it must not undo its market reforms and not go back to the closed nature of a command economy where the central government makes all economic decisions.

Instead, Hu said China should expend more effort convincing the rest of the world that it has no intention of building an economic model that is different from the current global system.

Under the previous export-oriented strategy, a government policy literally translated from Chinese as “big in, big out”, China positioned itself as the manufacturing link in global value chains by importing components and then re-exporting finished goods for consumer markets.