The important course of the international and domestic double cycle construction of China’s economy

The core of the 14th Five-Year Plan is new development stage, new development concept and accelerating the construction of a double cycle new development pattern. The accelerating evolution of profound changes unseen in a century and the critical period of the rise of the Chinese nation determine that we must balance development and security, and achieve a coordinated development of quality, structure, scale, speed, efficiency and security. Therefore, we must accelerate the building of a new development pattern with the major domestic cycle as the main body and the international and domestic double cycles reinforcing each other. We must promote high-quality development as the theme, deepen supply-side structural reform as the main task, take self-reliance and self-improvement in science and technology as the strategic support for national development, and expand domestic demand as the strategic basis.

Binary new development pattern of strategic thinking, including several big core connotation:

1. The new pattern of development strategy of binary motive strategy is to complete the socialist modernization goal, further deepen and all kinds of action plan in the new period as a whole, further adjust and optimize various strategic move, in order to form a new strategy of more conducive to the development of productivity. 

2. The strategic key of the strategy of dual-cycle new development pattern realizes the innovation-driven development of China's economy under the guidance of scientific and technological innovation. 

3. The strategic basis of the strategy of dual-cycle new development pattern is "unimpeded circulation of the national economy" and the realization of a high level of dynamic equilibrium. 

4. Expanding domestic demand is the strategic basis of the strategy of double circulation new development pattern. 

5. The strategic direction of the dual-cycle new development pattern strategy is to further deepen supply-side structural reform. 

6. The strategic support of the strategy of dual-cycle new development pattern is a new social development driven by the Belt and Road initiative with a higher level of openness and joint contribution, joint governance and shared benefits. The strategic driving force of the strategy of dual-cycle new development pattern is to further deepen reform. The strategic goal of the strategy of dual-cycle new Development pattern is to build a modern economy in an all-round way.

The new pattern of dual-cycle development is also an endogenous result of China's economic development at a specific stage. From the perspective of the evolution of the relationship between net export, consumption and employment, when a country's economy is in the development stage of insufficient domestic demand, net export and consumption will not constitute a factor competition relationship, but can bring about net increase of output, thus driving employment. But when domestic demand rises, the two may shift into competition for factors of production, and the increase in output from net exports may be offset by a contraction in domestic production of consumer goods, thereby not necessarily boosting employment. Based on China's provincial panel data from 1992 to 2017, the empirical study finds that before 2012, every 1 percentage point increase in net export leads to a significant increase in non-agricultural employment of 0.05 percentage points; But since then, the impact has turned negative: a 1 percentage point increase in net exports reduces non-farm employment by 0.02 percentage points. Further empirical analysis shows that there is no significant crowding out effect of net export on domestic consumption before 2012, but after that, every 1 percentage point increase in net export will reduce consumption by 0.03 percentage points. 

This conclusion has reminded us that China has from the potential factors of aggregate demand is insufficient to support the current stage to surpass the latter, in this context, the circulation and the relationship between the inner loop is complementary to competition from the past, appropriate to reduce dependence on external loop is not only the inverse induced by external factors, such as globalization, but also the inevitable result of the factors of supply and demand pattern change in China.

Post time: May-27-2022