To sustain growth, China is pushing a "dual circulation" development paradigm, which has been mentioned as a guiding thought in a blueprint for its development in the next five to 15 years.
"China will advance the building of a strong domestic market and a strong trading nation in a concerted way, based on the domestic circulation," read the Outline of the 14th Five-Year Plan (2021-2025) for National Economic and Social Development and the Long-Range Objectives Through the Year 2035.
What is the new development paradigm? Why did China put forward it in 2020? How will the country foster it? Here are some explanations.
-- What is the new development paradigm?
First floated by China's leadership in May 2020, the new development paradigm of "dual circulation" allows the domestic and overseas markets to reinforce each other, with the domestic market as the mainstay.
The key to building a new development pattern lies in unimpeded economic circulation and industrial connectivity, according to an article by Vice Premier Liu He expounding on the new paradigm.
The fundamental requirements are enhancing the creativity and connectivity of the supply system, removing various bottlenecks of development, and smoothing the circulation of the national economy, Liu wrote.
-- Why did China propose the new paradigm?
Despite the impact of the COVID-19 pandemic, the new development pattern comes not as a passive, short-term response, but as an active policy choice based on changes in the country's development conditions and demand for long-term high-quality growth.
Since the 2008 global financial crisis, Chinese authorities have put forward strategies including expanding domestic demand and supply-side structural reforms, suggesting the gradual shift toward internal circulation has long been underway, said Liu Yuanchun, vice president of the Renmin University of China.
Currently, protectionism and anti-globalization are on the rise, but the main driving force for the new development pattern is the shift in China's comparative advantage from a cheap labor force to huge domestic consumption potential, said Yao Jingyuan, a research fellow at the Counsellors' Office of the State Council.
It is a natural choice to focus on the domestic market as China's per capita GDP rises above 10,000 U.S. dollars and its middle-income population exceedings 400 million, entailing mass opportunities at home.
-- Will China close its door under the new pattern?
Making the domestic market the mainstay does not mean China is developing its economy with the door closed. By giving full play to the potential of the domestic market, both domestic and foreign markets can be better connected and utilized to realize robust and sustainable development.
Justin Yifu Lin, honorary dean of the National School of Development at Peking University, said that taking the domestic market as the mainstay doesn't mean a return to an inward-looking economy. He said it will not affect China's commitment to opening-up.
Despite the impact from COVID-19 last year, the country made strides in opening its market by unveiling three new pilot free trade zones. More notably, it signed the Regional Comprehensive Economic Partnership agreement in November 2020, which launched the world's biggest free trade bloc to date.
For the next five years and beyond, China will promote the liberalization and facilitation of trade and investment, and steadily advance institutional openness, which stresses rule-based, transparent regulatory models and business environment that better aligns with international norms, as outlined in the new five-year plan.
-- Why will China's new development paradigm be successful?
China's economic development over the past 40 years has laid a solid foundation for the country to forge the new development paradigm.
China has the world's most complete industrial system and largest middle-income population, and leads the world in terms of retail sales of consumer goods and total import and export volume. This makes it possible for the country to tap domestic demand for future growth.
China's ability to eradicate institutional obstacles through tireless reforms will support the operation of dual circulation as the market is playing a more decisive role in allocating resources and the country's business environment continues to improve.
According to a World Bank report, China's ease of doing business ranking rose to 31 last year, and it is also among the 10 economies that improved the most on the ease of doing business after implementing reforms.
-- How will China work to forge the new paradigm?
China's leadership has underscored that enhancing independent innovation capabilities and making breakthroughs in key and core technologies are vital to establishing the new paradigm.
For the next five years, China's research and development spending will grow by over 7 percent annually, according to the outline.
For domestic circulation, the outline noted that China will deepen its supply-side structural reform and innovate its modes of production to provide high-quality products and services. Other measures include rectifying resource misallocation and allowing the financial sector to better serve the real economy.
Meanwhile, the country will strive to become a strong magnet for global resources and production factors, promote the coordinated development of domestic and external demand, imports and exports, as well as foreign and outbound investment, according to the outline.