China’s “Dual Circulation” Lends Strong Impetus to China-EU Cooperation
Ambassador Zhang Ming Published an Op-Ed on EURACTIV
Recent years have seen more complexities and volatility in the global economy. The COVID-19 has further accentuated the uncertainties. Against such backdrop, China will foster a new development paradigm with domestic circulation as the mainstay and domestic and international circulations reinforcing each other. This is an overarching strategy for China’s economic development.
Domestic circulation is the mainstay. This is what China must do to adapt to the changing economic landscape both at home and abroad. First, China’s internal dynamics are evolving. The challenge confronting the Chinese society is that unbalanced and inadequate development cannot meet our people’s ever-growing needs for a better life. China’s per capita GDP has crossed the US$10,000 mark, and consumer demand is on the rise. However, China’s domestic supply of medium- and high-end products and services remains insufficient. Consumption accounts for less than 60% of China’s GDP, lower than the global average. The supply-demand gap discourages the upgrading of consumption and economic restructuring in China. Second, the external environment is changing. Given the headwinds against globalization, the resurgence of protectionism and the disruption in global supply chains due to the COVID-19, China’s economy is exposed to greater external risks. Third, for China, the relative weight of global and domestic markets is changing. After the international financial crisis, global demand remains sagging. In terms of trade, China’s external dependence ratio has dropped from the peak of 67% to 32%. By contrast, since 2000, China’s economy has grown by ten folds in aggregate terms. The domestic market is becoming more and more important. As China enters a new stage of development under the new circumstances, while engaging in the international circulation, we must consolidate the domestic circulation in order to make our economy more resilient and sustainable. The key is to ensure unimpeded circulation at home by lowering transaction costs, improving business environment and enhancing the efficiency of resource allocation. With a huge market of 1.4 billion people including a 400-million strong middle-income group, we hope to further boost economic growth through industrial and supply upgrading, and keep the upward momentum of our economy. As Chinese Ambassador to the EU, like my colleagues, I am closely watching the economic dynamics in the EU, in order to identify more opportunities for mutually beneficial cooperation and to draw on the useful experience of EU practices. It is the internal circulation that underpins the EU economy. The intra-EU consumption, trade, and investment are much higher than extra-EU ones. The EU has always been an important player in the Chinese market. China’s domestic demand is the EU’s external demand, which means a source of growth for the EU. With decades-long experience in integration, the EU is in a better position to understand and see the full picture of China’s new development paradigm.
China will continue to promote reinforcement between international and domestic circulations. This is a fundamental policy that China firmly commits to. China will not shut its door to the outside. Rather, China will promote greater institutional opening-up, make the best of external resources, and achieve mutual benefit. This is not only what we say, but also what we are doing. The Regional Comprehensive Economic Partnership (RCEP), to which China is a party, illustrates our commitment to economic openness and free trade. We have significantly shortened the negative list for foreign investment. Volkswagen, Allianz, among other foreign-invested companies, have scaled up their investment in China in such areas as automobile and finance. China and the EU have formally signed the geographical indications agreement. More and more EU quality agricultural products, like wine, cheese and ham, are reaching Chinese dinner tables. We are making every effort to advance the negotiation on the investment agreement. Once concluded, the agreement will offer more market access opportunities to EU investors. We have held international import expos for three years in a row. China-Europe express rail link has seen a growing number of trips. We are building the Hainan free trade port. We are delivering on the commitment to further opening-up, and are more than happy to share with the EU traders and investors the market opportunities in China.
The dual-circulation development paradigm will open up new horizons for the EU. As China’s major economic and trade partner, the EU serves as a major link between China’s domestic and international circulations. Together, China and the EU account for over 30% of the global GDP. The EU takes up 15% of China’s foreign trade. The two-way investment grows steadily. Hopefully the EU companies will further unleash their potential in the Chinese market by fully harnessing their strengths in branding, capital and technology, make the best use of their geographical proximity to the “China workshop” and “China market”, seize market opportunities in an open China, get deeply involved in China’s dual circulations, and share the growth dividends. The “dual circulation” development paradigm will also help the Chinese economy move in a direction of higher-quality growth. China is making vigorous efforts to explore new drivers of economic growth. Digital economy, green economy and marine economy are well-placed to become China’s new growth engines. At the same time, the EU is promoting green and digital transitions. China and the EU are building partnerships for green and digital development. The EU companies would be well advised to stay ahead of the curve, seize the opportunities arising therefrom, and take the prize.