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The View
OpinionComment
Hao Zhou
Hao Zhou

What China’s pivot towards economic self-sufficiency means

  • As global headwinds grow, China has turned its attention inward to focus on domestically driven economic growth
  • This will come at the expense of efficiency and accelerate deglobalisation, but it’s a price Beijing is willing to pay

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Shoppers in Beijing on July 30. China’s massive domestic consumption is the most important driver in its new policy, which means ensuring that the job market is in good health. Photo: Reuters
Hao Zhou

When Chinese Vice-Premier Liu He first talked about the concept of “dual circulation” in his keynote speech at the Lujiazui Forum in mid-June, few had any idea what he was referring to. “A new dual-cycle pattern, which is dominated by the domestic economic cycle and facilitated by the cycle between China and overseas countries, is taking shape,” Liu said.

Last week, as China’s top decision-making body, the Politburo, wrapped up the country’s half-year economic review and laid out the blueprint for the next few decades, Chinese policymakers vowed to accelerate the formation of this so-called dual circulation, with emphasis on technological innovation and the manufacturing sector.

Those familiar with the Chinese political system would be aware that a new term appearing on the top-level agenda probably signals a change of strategy.

To make more credit available for technology and industrial upgrading, the authorities have reiterated their resolve to curb property speculation. In the past two decades, the housing sector has attracted many investors seeking capital gains, crowding out financing for manufacturers and small firms.

Since the financial deleveraging campaign that started in 2017, the government has taken a tougher line on the property sector and on shadow banking, suggesting a policy shift towards a more sustainable growth path, away from reliance on the property sector.
A tightening of property rules is already under way. After housing prices rebounded sharply in Shenzhen, the city government announced in mid-July that anyone with a residency permit for the city – previously all that was needed to buy Shenzhen property – would now have to provide proof of income tax or social security payment history for three consecutive years in the city to be eligible.
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