ExplainerWhat is China’s dual circulation economic strategy and why is it important?

China’s emphasis on growth through exports is being bolstered by a focus on domestic demand as the international trade environment comes less supportive

The coronavirus has highlighted the risks and vulnerabilities inherent in deep trade integration, spurring countries to reduce their reliance on other economies

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China is looking to rely more on domestic consumer spending, shifting its growth engine from state-led investment and exports, seen here at the Port of Lianyungang in Jiangsu province. Photo: Bloomberg

Published: 5:30pm, 19 Nov 2020Updated: 2:43pm, 4 Mar 2021

What is China’s dual circulation strategy?

The so-called dual circulation strategy was first mentioned at a meeting of the Politburo, China’s 25-member policymaking committee, in mid-May.

The plan places a greater focus on the domestic market, or internal circulation, and is China’s strategic approach to adapting to an increasingly unstable and hostile outside world.

It is expected to see China place less reliance on its export-oriented development strategy, or external circulation, without abandoning it altogether.

President Xi Jinping later added that China would “gradually form a new development model in which domestic circulation plays a dominant role”.

Dual circulation is also included in China’s 14th five-year plan, for 2021-25.

What does China’s dual circulation strategy mean?

Officially, China will look inward to tap the potential of its huge domestic market and rely on indigenous innovation to fuel growth.

But despite the increased emphasis on the domestic market and on self-reliance in some sectors, President Xi has said repeatedly that China will not completely close itself off from the outside world, and will instead open up more.

There are, however, some concerns that China will take an inward-looking approach to its future development since it is difficult to balance self-reliance with opening up.