Dual circulation needed to protect China's economy in ‘extreme’ circumstances, Xi Jinping warns
• The Chinese president said the strategy to boost domestic activity will make sure the country can continue to function normally
• The comments to manufacturers in Inner Mongolia were Xi’s second recent warning to prepare for ‘worst-case’ scenarios
William Zheng, SCMP
Chinese President Xi Jinping said China’s strategy to build domestic economic circulation is to make sure the economy can function normally “under extreme circumstances”, in another stern warning of the geopolitical uncertainties ahead.
Xi said the dual circulation strategy is “not contradictory” to China’s participation in international trade and investment flows, during an inspection tour of manufacturers in northern China, state news agency Xinhua said on Thursday.
Xi’s remarks came just a week after his warning to a top level security meeting that China should prepare for “worst-case and extreme scenarios”, to withstand “high winds and waves and even perilous storms”.
During his visit to Hohhot, capital of the Inner Mongolia autonomous region, Xi praised the local companies’ research and development efforts in new energy and materials.
He urged them to continue to push forward “high-level science and technology self-reliance and overcome science and technology’s bottlenecks”, according to the Xinhua report.
Xi then said “the purpose of building a large domestic circulation is to ensure that the nation’s economy can continue to operate normally [even] under extreme circumstances, that is not contradictory to participating in international economic circulation”.
“We are unswervingly implementing high-level opening up to the outside world, building the nation with our doors wide open, and working together [with partners] to achieve win-win results.”
The dual circulation concept was introduced in 2020 and signalled Beijing’s pivot from the export-oriented growth model. The strategy was also included in Xi’s working report to the 20th Party Congress in October.
The strategy aims to reorient the country’s economy by prioritising the domestic front, while remaining open to international trade and investment. It initially raised concerns about China’s openness, leading to repeated assurances from the party that it did not mean shutting the country’s doors to business.
Xi’s first mention of the need to prepare for “the worst scenario” on the economic front was in his address to all members of the 19th Central Committee at the party’s fifth plenum in October 2020.
In the speech – that was not released in full until last year, when it was published by the ruling party’s top theory journal Qiushi in August – Xi said China needed to make a pre-emptive move to reorient its economy because of an “international situation full of instability and uncertainty”.
He called for the country to rely on the advantages of its large domestic market and fully tap its potential to help with “defusing the impact of external shocks and the decline in external demand” and ensuring the “smooth running of China’s economy and the overall stability of the overall social situation under extreme circumstances”.
According to Xie Maosong, a senior fellow of the Taihe Institute and a senior researcher at the National Institute of Strategic Studies at Tsinghua University, Xi’s latest remarks aimed to address the worst case scenario of US efforts to decouple from China.
“Dual circulation was launched in response to the waves of economic and technology sanctions from the United States in 2018. Thus, in his previous speech, the focus is on how to build domestic circulation as Beijing needs to dig its trenches and prepare for the worst scenario of the US fully decoupling with China,” he said.
“A few years [later], both sides know decoupling is easier said than done. Beijing’s stance is practical and flexible. In case of further decoupling, it will have its domestic market to fall back to,” Xie said.
“But it will continue to shake hands with those who wants to do business with China. That is why you see people like Elon Musk and other American business leaders warmly received in Beijing.”
In his visit to Hohhot on Thursday, Xi heard a work report from the Inner Mongolian party committee and government that ordered local officials to “explore new transformation and development paths” suitable for resource-rich regions.
Officials are also expected to continue their efforts to improve the region’s ecological environment, the work report said.
This article was originally published by the South China Morning Post on June 9, 2023.