China’s new “Dual Circulation Strategy”

Highlights:

  • End of last week, China approved its “Dual Circulation Strategy” which is the new five-year plan from 2021 to 2025. 
  • The plan intends a shift in the basic growth engine from exports to domestic demand. It also intends to further tackle the high credit-to-GDP ratio. Moreover, in the long run demographics will become a headwind. 
  • For private consumption this implies to lower the still high savings rate, increase urbanisation and to improve human capital. 
  • For investments, there is the need to raise productivity and to ”clean-up” the past misallocation of credit. A focus will lie on technological advances which will be supported by infrastructure modernisation. 
  • Finally, China does not want to close its doors but ”learn” from abroad which warrants a further opening up of the corporate sector and financial markets amid a strengthening of property rights.

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CHINA’S NEW “DUAL CIRCULATION STRATEGY”

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CHINA’S NEW “DUAL CIRCULATION STRATEGY”
At the end of October, China approved its “Dual Circulation Strategy” which is the new five-year economic plan (2021 – 2025). The concept has been under discussion for quite some time and President Xi highlighted it already in May. In a nutshell, the concept promotes domestic demand as the central growth engine. It foresees more independent and resilient supply chains while at the same time it intends to further opening-up the corporate sector and financial markets.