A top economist whose strategic thinking about China’s role in global value chains helped turn the country into the world’s factory says it is now time for Beijing to look inward for growth as the outside world is becoming more unpredictable. Early in 1988, when China had little capital, Wang Jian published an article in the official Economic Daily arguing the country should take advantage of its cheap labour force to position itself as a global manufacturing hub by importing components and then exporting finished products to rich economies. Under the export-oriented strategy, a government policy literally translated from Chinese as “big in, big out”, China rose from an economic backwater to a manufacturing powerhouse. Three decades later, Wang believes it is now time to make choices that will bring China’s economic miracle to “a new peak”. Any large country should rely on its domestic market Wang Jian “The impact of the coronavirus pandemic on international supply chains and external demand is hard to estimate, we need to expand domestic demand as much as possible. That is what we can control,” 65-year-old Wang, who is now head of the Beijing-based China Society of Macroeconomics, a think tank associated with the economic planning agency, told the South China Morning Post. “Any large country should rely on its domestic market.” According to Wang, China’s export-driven economic model – with exports accounting for 36.04 per cent of Chinese growth at its peak in 2006 – can only last for a certain period. Wang said it was “increasingly urgent” for China to rely on itself for future development, as Washington is pushing to separate the US economy and the economies of willing allies from China, although he admits it will be difficult for the US to fully decouple its economy from China. “The United States has a giant gap between production and consumption that is filled by China. It won’t easily cut off imports from China,” he added. To enable itself to rely on its own domestic economy, China must roll out a new urbanisation push to turn the country’s rural and migrant worker population into urban consumers, Wang said. The shift of Wang’s focus, as well that of President Xi Jinping, from a globalisation-driven economic model to domestic-led growth comes as a new consensus is growing in Beijing on the need for self-reliance and economic security. Wang said China’s external economic strategy should focus more on securing overseas resources rather than on increasing sales to markets abroad while “domestic demand is not unleashed”. At the same time, it remains an open question whether China can produce the growth necessary to avoid the so-called middle-income trap, where wages rise to the point that growth potential in export-driven low-skill manufacturing is exhausted before the country is able to effectively compete with developed countries in higher value-added goods and services. The rapid development in the last four decades has also left the country with a huge wealth gap between the nation’s well-off and most of its 1.4 billion people. While China officially boasts a vast middle-income group of around 400 million, it also has a larger population living under relatively poor conditions. Premier Li Keqiang said last month that 600 million people in China now earned just 1,000 yuan (US$140) per month. Wang said China’s nationwide per capita gross domestic product (GDP) is around US$10,000, indicating that the country is in the middle-income range. However, he said around 1 billion people live in conditions corresponding to per capita GDP of US$4,000, a level equivalent to that in Indonesia or Sri Lanka. As such, China has to rely on urbanisation to boost growth, he said, echoing a popular view in China that the country can count on itself to drive growth. Currently, around 60 per cent of China’s population live in urban areas, but Wang believes China needs to relocate another several hundred million people from the countryside to cities to aid growth.