China’s leaders are currently putting the finishing touches on the country’s 14th Five-Year Plan, which will cover the 2021-25 period. But one aspect of the plan – the so-called dual-circulation strategy – is already attracting the world’s attention. Many fear that China is “turning inward” just when the global economy is staring down the barrel of a recession. These fears are misplaced.
According to President Xi Jinping, the dual-circulation strategy means that China will rely mainly on “internal circulation” – the domestic cycle of production, distribution, and consumption – for its long-term development. This will reduce China’s dependence on overseas markets and technology.
But that doesn’t mean China is withdrawing from the world. To understand what it does mean, one must first comprehend how Chinese policymakers think about the country’s long-term development trajectory.
Unlike Western leaders, who typically have degrees in law or economics, Chinese policymakers are mostly scientists and engineers. As a result, they are more likely to think in systemic terms. China’s Five-Year Plans are crammed with engineering and systemic terms, such as “top-down architectural design,” networks, platforms, and processes. This approach means that Chinese policymakers look beyond mainstream micro- and macroeconomic models to account also for meta- and meso-considerations.
China’s dual-circulation strategy is a pragmatic response to the rapidly changing internal and external pressures the country faces. Policymakers’ goal is to boost supply-chain and market resiliency by leveraging China’s massive population of 1.4 billion – including 400 million middle-class consumers.
But strengthening internal production and consumption cycles does not mean destroying external trade, investment, tourism, and education networks; on the contrary, China is set to continue opening up its economy, especially its financial market. Rather, dual circulation means that external exchanges will be expanded and deepened in ways that complement the domestic economy.
Source: Project Syndicate website.