China's Dual Trading: New Prospects for International Trade Amid Trade Tensions and Protectionist Policies

Abstract

With signs of deglobalization, the world appears to be returning to an era of economic sovereignty, with countries increasingly placing national security and sovereign interests at the forefront. Many countries are focusing on putting their national interests first, reflecting a shift in global priorities for international trade.

Moreover, the uncertainty caused by the global pandemic has prompted many countries to create a more controllable supply chain system, highlighting the trend toward near-internal rather than external production. Instead of focusing on efficiency and cost as it used to, dual circulation has become a Chinese economic strategy or orientation that represents a shift in the country’s economic model, focusing on strengthening the domestic market (internal circulation) while maintaining openness to international markets (external circulation). This strategy was announced in the context of increasing global challenges, such as trade protectionism and geopolitical pressures, making it necessary for China to reduce its dependence on external demand and increase reliance on the domestic market. The core of the dual circulation strategy is to reduce reliance on trade-centered international circulation and promote domestic circulation consisting of production, distribution, circulation and consumption in terms of supply and demand, while maintaining the policy of opening up to the outside world. Expanding domestic demand based on consumption and implementing supply-side reforms to improve productivity and promote industrial upgrading through innovation are the core pillars of the strategy. The concept of "dual circulation" was first introduced on May 14, 2020, at the Standing Committee of the Political Bureau of the Communist Party of China Central Committee.