Opinion | China’s economic future depends on closing its wealth gap otherwise new domestic strategy won’t work
- China’s new strategy will place a priority on the domestic market to sustain economic growth
- China has 1.4 billion potential consumers, but its wealth gap is among the widest in the world, meaning a large portion of the population are relatively poor.
China announced last week its new strategy to cope with a less accommodating international environment, so-called dual circulation, under which it will pursue growth in both its domestic and foreign trade sectors, but with the priority on the domestic market.
The message is clear: China has to rely more on itself to sustain economic growth. China will cut its reliance on overseas markets to keep its factories humming, and it will develop its own technologies so that the United States, or any other country, cannot easily threaten the economy with embargoes or sanctions.
Circulation in this case refers to the cycle of production and consumption. When China adopted the idea of “great international circulation” in the early 1990s, it meant China would pursue an export-oriented growth model – picture a migrant worker walking into a Taiwanese-owned factory in a coastal city, assembling components from Japan or South Korea into finished products destined for the US market.
The project of turning China’s population, or the bulk of it, into modern consumers will require deep-rooted, and at times, painful structural reforms of the political economy system
The self-reliance mindset, especially when the external environment turns hostile, is deeply rooted in the ruling Chinese Communist Party. The spirit of zi li geng sheng, or relying on one’s self to win battles and to pursue development, has been hailed by generations of Chinese leaders starting from Mao Zedong. The “great domestic circulation”, to Chinese ears, is more or less a new expression of that spirit.