The coronavirus pandemic was a stress test for the Chinese economy, exposing risks to the industrial supply chain, Chinese President Xi Jinping told senior Communist Party advisers as he briefed them for the first time in early April on his “ dual circulation ” plan to boost domestic consumption. “This pandemic is a stress test under real combat conditions,” Xi said in a speech on April 10, two days after Beijing lifted the lockdown in the central city of Wuhan, where the coronavirus was first detected, and a month before the policy was unveiled to the public. The full speech was published in party-affiliated journal Qiushi on Saturday following an annual policy-setting meeting of the party’s upper echelon last week. China’s leaders start charting course for next five years with economy and US friction in spotlight In the April 10 speech, Xi said the pandemic would intensify the international shift away from globalisation that was weakening China’s “world factory” model of development. As a result, China had to rely more on domestic production and consumption to achieve long-term growth – while also continuing to open up to foreign investment. “There is no contradiction between expanding domestic demand and opening up,” Xi said, outlining an approach that would be made public in mid-May. “The smoother the domestic circulation works, the more attractive it will be to global resources, and more conducive to building a new ‘dual circulation’ development model that is focused on domestic circulation with support from international circulation.” China promotes new-energy vehicles in drive to get economy back on track Under the new model, China aims to make the country’s 400 million-strong middle class – roughly a third of the population – a firm foundation for consumption and expand the group through education and lifting the incomes of lower-paid workers. It also aims to encourage more rural workers to move to urban areas but each city should not expand without limits, according to the speech. Xi suggested setting up a cap on the density of big cities. For example, major centres like Beijing and Shanghai already had more than 20,000 residents per square kilometre, compared with 13,000 people per square kilometre in Tokyo and New York, he said. Instead, policymakers should develop 1,881 counties to help expand domestic demand, encouraging rural families to buy homes and settle down in county-level cities, Xi said. China’s rapid GDP growth shows why coronavirus controls must trump reopening economy In addition, China needed to have at least one alternative supplier of essential products and step up innovation to replace imported items with domestic options. In a veiled reference to the US’ restrictions on hi-tech sales to China, Xi said China needed to develop the full industrial chain in the high-speed rail, power equipment, new energy and telecom equipment sectors to increase the global reliance on China, and to guard against efforts to cut off overseas supplies. “We need to build controllable and reliable domestic production and supply systems in areas that are key to national security, to ensure the economy can ... operate normally under extreme conditions,” Xi said. He also warned against hollowing out of manufacturing. “The real economy is the foundation, and manufacturing cannot be thrown away. As a country with 1.4 billion people, we must be self-reliant in food and the real economy.” Xi also lauded state-owned enterprises for their role in fighting the pandemic, saying SOEs must be stronger, better, and bigger. “Indeed, state-owned enterprises need reform, but they cannot be denied or weakened,” Xi said.