Commentary: China looks to 'dual circulation' amid uncertain times

An aerial view of Lujiazui area in Shanghai. [Photo/Xinhua]

On Oct. 29, the communique of the fifth plenary session of the 19th CPC Central Committee was released, setting out China's vision for the near future. Coming in what has been a disruptive and uncertain year, the document introduced new concepts including "dual circulation" and "self-reliance," with particular reference to technology, supply chains and research and development. 

There is little question that the world has changed dramatically in 2020, especially concerning China's relationship with certain countries. The COVID-19 pandemic has caused unprecedented disruption to the global economy, historic recessions, unemployment and slowing consumption. It has, however, also aggravated geopolitical hostility towards China and accelerated movements seeking to undercut globalization in favor of protectionism and a re-emphasis of "national sovereignty" under the logic of national security.

Although such sentiments were already rising in the United States, the pandemic has seen politicians weaponize a cold-war approach to China and double down on a "decoupling" from Beijing. This has come in tandem with trade and technology wars the Trump administration has already been waging against China, including tariffs on imported Chinese goods in the effort to force supply chain shifts and efforts to hinder companies such as Huawei by depriving them of key U.S. parts and components.

Given these circumstances, the previous environment which China premised its international development on, lasting from roughly 1978 to 2018, has come under threat. Although Beijing's own position is a lot stronger, the United States is actively seeking to block China's technological development by maintaining a monopoly over crucial technology. As the U.S. pushes its allies to follow suit, this ultimately means that China can no longer rely solely on the goodwill of other countries and guarantees of openness. While China will continue to engage in free trade, international collaboration and exports, Beijing will nonetheless have to take steps to counter a hostile environment.

Over the past year, China has learnt the hard way that Huawei was at the mercy of the U.S. government, which quickly exposed its supply chain vulnerabilities in an attempt to leverage it by restricting key parts and thereby damage its role in global 5G markets. This represents an obvious threat to China's development. After all, how can China move upwards and secure its national interests if dependency on the U.S. is now being weaponized against it? 

This is a strategic vulnerability which must be fixed. Therefore, China's plan emphasizes technological self-reliance by dramatically accelerating its own capabilities in crucial sectors, thus "catching up" to the U.S. and mitigating the impact of its technology war. Through greater investment in R&D and a reduction of its dependency on U.S. technology giants, the country can be more competitive in selling high tech components — something it has previously been unable to do.

The "dual circulation" strategy allows China's economy to prosper by sustaining itself in a circular pattern of production and consumption. While China continues to advocate multilateral and free trade, sustained development in the country also relies on what happens domestically. With a huge population of 1.4 billion, China has the largest consumer market on earth and so is well positioned to do so. 

Closely linked to the concept of self-reliance, the "dual circulation" strategy involves playing to one's own strengths by developing the domestic market in a way which perpetuates production and consumption in a circular pattern.

Although China is not about to downsize its role in global exports, it has to respond to threats by certain countries to "decouple" and also uncertain global trade caused by COVID-19. This will allow China to keep growing and weather such potential contingencies, while technological self-reliance will ensure that China can produce key components which will consolidate its own high-tech supply chains.

The document comes at a time of unique challenges for China, but the country is in a strong position to overcome them. Ending the year as the world's only growing major economy — and with many advanced countries still struggling to overcome the coronavirus — China has proved its resilience and acquired both time and resources to adapt to the uncertainties. This is not an "inwards turn" or an abandonment of globalization or multilateralism, but a strategic vision in response to this new environment.

In order to continue developing, China must play to its advantages by empowering its own consumer market and investing in new technologies. It cannot move forwards without doing so. Therefore, this is about the measures needed to keep an existing trajectory going. China is not desperately lagging behind other countries, nor is it cutting anyone off, rather it is seeking to close the gap and this plan is its vision to do so.(By Tom Fowdy )

Tom Fowdy is a British political and international relations analyst and a graduate of Durham and Oxford universities. He writes on topics pertaining to China, the DPRK, Britain and the U.S. Opinion articles reflect the views of their authors, not necessarily those of China.org.cn or yunnangateway.