'Dual-circulation' pattern not a concept focused on demand, says expert

Improving business exchanges with the international markets, rather than reducing the reliance on external demand, will be the key focus for China in its new "dual-circulation" development pattern, a senior economist said.

Zhu Min, head of Tsinghua University's National Institute of Financial Research and a former deputy managing director of the International Monetary Fund, said the" (new pattern) is not a concept focused on demand."

Instead, the core of the "dual-circulation" pattern lies in smoothening business exchanges both within the domestic market and with international markets, with the items exchanged set to expand from commodities to resources, information, technology, and "everything", Zhu said.

"In that sense, making sure that China continues the reform and opening-up efforts, and the two systems (domestic economic circulation and international exchanges) link and work together is the most important thing," he said.

According to Zhu, China has become a largely domestic demand-driven economy in the past decade with its net trade surplus dropping to less than 1 percent of its GDP.

Zhu's remarks came after China put forward the "dual-circulation "development pattern, whereby internal economic circulation is the mainstay while the domestic and external markets can complement each other.

Analysts said the new development pattern has marked a strategic shift in China's policymaking and is expected to serve as the policy framework of the upcoming 14th Five-Year Plan (2021-25).

Zhu said addressing the country's weak links in upstream technologies and meeting people's demand for consumption of higher quality are the two main tasks under the dual-circulation pattern.

The country's policy priority of stabilizing employment and the construction of new types of infrastructure like 5G this year has underlined its commitment to the two tasks, he said.

"I think foreign companies will come to China more to participate in the dual-circulation construction process," Zhu said, as both tasks entail international cooperation and provide huge development opportunities for foreign businesses.

For instance, the country is expected to further open its financial sector when it comes to pension funds, asset management and financial derivatives, said Zhu.

He emphasized that the new development pattern is critical for China and the world, as it is not only a strategic choice for the country to face the uncertainties arising from economic and geopolitical situations, but will also lay the foundation for China's sustainable economic development.

The biggest uncertainty faced by the global economy is not the COVID-19 pandemic itself or the related economic recession, but the rising political uncertainties, Zhu said, citing that different economies seem to be less willing to cooperate with each other than during previous crises.

The dual-circulation pattern will help the Chinese economy withstand the external uncertainties by strengthening the country's internal economic circulation system, he said.

Zhu said that China's pursuit of internationalizing its currency is set to gather pace as the renminbi may continue to appreciate against the greenback amid a weakening credibility of the latter.

The US Federal Reserve's large-scale easing measures and the US economic recession have impaired investors' confidence in the greenback, he said.

Meanwhile, global investors' rising demand for renminbi-denominated assets and China's efforts to launch its official digital currency will help elevate the international status of the renminbi, a process that will contribute to global financial stability, Zhu said.

The country will continue to open and work with the whole world in improving global cooperation and stability, contributing more to the global economy, he said.