Opinion

Dual circulation strategy continues China’s push to open up

Export promotion strategies can become self-negating when an economy grows past a certain point, and China is no longer a small economy

Dual circulation does not imply any fundamental change in the growth paradigm, and China will not turn its back on the world no matter what happens

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An oceangoing freighter loads containers at a port in Lianyungang, in eastern Jiangsu province, on September 7. While the contribution of exports to China’s growth formula has shrunk over the years, they are still expected to play an important role in the country’s “dual circulation” strategy. Photo: Xinhua

Yu Yongding, a former president of the China Society of World Economics and director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, served on the Monetary Policy Committee of the People’s Bank of China from 2004 to 2006.

Published: 4:35pm, 30 Sep 2020Updated: 9:16pm, 30 Sep 2020

In May, China’s central leadership proclaimed it would “fully develop the advantages of [the country’s] super-large market and the potential for domestic demand to establish a new development pattern featuring domestic and international dual circulations that complement each other.” “Dual circulation” has been the subject of intense discussion within and outside China ever since.

Does the announcement signal a fundamental shift in China’s growth paradigm or development strategy? Why was this new concept introduced, and what policy changes will it entail?

To answer these questions, one should revisit the process of China’s “reform and opening up” since it began in the late 1970s. Around the end of that decade, the key hurdle preventing China from taking off economically was a shortage of foreign exchange reserves. Policymakers faced what seemed to be a Catch-22: China could not jump-start its exports without foreign reserves, and without decent export growth it could not accumulate the minimum necessary amount of reserves.