China’s dual circulation strategy seeks to spur China’s domestic demand on one hand and simultaneously develop conditions to facilitate foreign investment and boost production for exports on the other.
中国的“双循环”战略，一方面要刺激国内需求，另一方面要创造条件促进外商投资和促进出口生产。
Thus, the two-pronged strategy refers to the parallel emphasis on an ‘internal circulation’ and an ‘international circulation’ and a shift towards becoming a demand and innovation-driven economy.
因此，双管齐下的战略指的是平行强调“内部循环”和“国际循环”，并向需求和创新驱动的经济转变。
While on its own merit, the DCS is not an inwards-looking strategy, the focus on tapping into China’s internal consumption patterns and domestic markets aims to buffer the impact of global economic headwinds and unpredictable external events on China’s economic and financial stability. The strategy is also, in simpler terms, a culmination of China’s intentions to become more self-reliant as well as increase its export market exposure.
尽管发展中国家战略本身有其可取之处，但它并不是一种着眼于国内的战略，其重点在于利用中国的内部消费模式和国内市场，以缓冲全球经济逆风和不可预测的外部事件对中国经济和金融稳定的影响。简单地说，这一战略也是中国增强自力更生、增加出口市场敞口的意图的顶点。
In May this year, when China just caught its breath from the COVID-19 outbreak and Western countries began to flounder, Chinese president Xi Jinping proposed a new economic model – the “dual circulation strategy” (DCS) at a Politburo meeting.
今年5月，当中国刚刚从新冠肺炎疫情中缓过气来，西方国家开始陷入困境时，中国国家主席习近平在政治局会议上提出了一种新的经济模式——“双循环”战略。
Though the DCS would come to be more frequently invoked by the Chinese leadership in later meetings, it stirred up much discussion among China market watchers due to the absence of concrete details.
尽管在以后的会议中，中国领导人会更频繁地提到“双循环”，但由于缺乏具体细节，它在中国市场观察人士中引发了大量讨论。
This article will briefly explain what the DCS actually means, why China is pushing for it now, what changes can be expected, and what will be the policy’s implications for foreign investment.
这篇文章将简要说明DCS的实际含义，为什么中国现在正在推动它，可以期待什么变化，以及该政策对外资的影响。
What is the dual circulation strategy?
如何理解“双循环”战略
The “dual circulation” strategy (DCS) is a two-pronged development strategy that seeks to spur China’s domestic demand in addition to catering to export markets and will create conditions that allow domestic and foreign markets to boost each other.
“双循环”战略是一种双管齐下的发展战略，既要满足出口市场需求，又要刺激国内需求，为国内外市场相互促进创造条件。
The strategy is slowly becoming the underlying policy refrain to accompany China’s actions to recoup loss of growth momentum due to the coronavirus outbreak. Some analysts, however, assume that this is a signal that China’s economy will look inward and reduce its exposure to the vagaries of the global economy.
这一战略正逐渐成为伴随中国采取行动、弥补因冠状病毒爆发而失去的增长势头的基本政策约束。然而，一些分析师认为，这是一个信号，表明中国经济将关注内部，减少对全球经济变幻莫测的敞口。
Why is DCS being pushed by China now?
为什么中国现在要推动“双循环”战略 ?
Many analysts see China’s DCS as a quick and passive response to the unpredictability in global markets. In fact, the dual circulation strategy also follows China’s long-held goal of rebalancing its economy.
许多分析人士认为，中国的发展中国家是对全球市场不可预测性的一种快速而被动的回应。事实上，双循环战略也符合中国长期以来实现经济再平衡的目标。
In the 1980s, China’s former leader Deng Xiaoping first adopted the ‘reform and opening-up policy’ and began implementing an export-oriented development strategy. As the tide of globalization grew in strength, China grabbed the many opportunities in its wake. Relying on the abundance of cheap Chinese labor and the country’s strong business ecosystem, lack of regulatory compliance, and low taxes and duties – China quickly became the “world’s factory”, center of the world’s supply chain for many industries, and achieved what is now referred to in haloed tones as the continuous rapid growth miracle of the Chinese economy.
上世纪80年代，中国前领导人邓小平首次采取了“改革开放政策”，并开始实施出口导向型发展战略。随着全球化浪潮的增强，中国抓住了随之而来的许多机遇。依靠中国丰富的廉价劳动力和国家的强大的商业生态系统,缺乏法规遵从性和低税收和关税,中国迅速成为了“世界工厂”,世界中心的供应链对许多行业,取得了现在的这个音调所作为中国经济的持续快速增长的奇迹。
The 2008 global financial crisis would soon expose the Chinese fast-growing economy to the fragility of the export-led economic model, prompting Chinese policymakers to rebalance growth towards cultivating and supplying domestic demand. In addition, there was an important realization – the export-oriented trade pattern where Chinese businesses import raw materials to process and then export to foreign markets – had locked China into the middle order of the global value chain.
2008年的全球金融危机，将很快使快速增长的中国经济暴露在出口拉动型经济模式的脆弱性之下，促使中国政策制定者重新平衡增长，转向培育和供应内需。此外，还有一个重要的认识——中国企业进口原材料加工后再出口到国外市场的出口导向型贸易模式——将中国锁定在了全球价值链的中间位置。
To achieve sustainable growth and move beyond the limitations holding back its economic expansion, China began rolling out consistent economic reforms over the past decade, including supply-side structural reform in 2015 and Made in China 2025 announced in 2018. The ultimate goal has been to shift itself from being an “export and investment-led” economy to a “demand and innovation-driven” economy.
为了实现可持续增长，突破阻碍经济增长的限制，中国在过去十年中开始持续推进经济改革，包括2015年的供给侧结构性改革和2018年宣布的《中国制造2025》。其最终目标是将自身从“出口和投资导向型”经济转变为“需求和创新驱动型”经济。
From 2006 to 2019, the trade-to-GDP ratio of China slid from 64.5 to 35.7 percent. However, while overall investment jumped, the portion of domestic private consumption only marginally arose, stabilizing at 38.8 percent of GDP in 2019 – barely higher than a decade earlier.
2006年至2019年，中国贸易占GDP的比重从64.5%下降到35.7%。然而，尽管总体投资大幅增长，国内私人消费的比重仅略有上升，在2019年稳定在GDP的38.8%，仅比10年前略有提高。
The ongoing COVID-19 pandemic has additionally provoked global concerns on supply chain dependency, as different countries have been forced to rethink their reliance on other countries (especially in strategic industries, such as medical supplies and access to pharmaceutical raw ingredients), which will likely accelerate supply chain shifts out of China.
新冠的流行另外引发了全球的担忧在供应链的依赖,为不同的国家被迫重新考虑依赖其他国家(特别是在战略性行业,如医疗用品和药品原料),这可能会加速中国供应链转变。
Growing concerns in the West about the impact of China’s integration into the global trade system are pushing countries, led by the US but also increasingly, the European Union, Australia, and Japan, to weigh their trade ties with China. A general retreat from globalization among Western democracies could mean more limited market access to these countries for China.
西方国家对中国融入全球贸易体系的影响日益感到担忧，这促使以美国为首的国家，以及以欧盟、澳大利亚和日本为首的国家，权衡它们与中国的贸易关系。西方民主国家普遍退出全球化可能意味着中国在这些国家的市场准入将更加有限。
To make matters worse, COVID-19 and the shutdown measures to contain it, have plunged the global economy into the worst recession since World War II, adding to the woes of the global economic slowdown and resulting in a shrinking export market for China (with certain exceptions, such as in the case of medical supplies and vaccines).
更糟的是,新冠疫情的爆发及各国的“闭关”政策,已使全球经济陷入二战以来最严重的衰退,加剧了全球经济放缓的困境,导致中国出口市场萎缩(与某些例外,如在医疗用品和疫苗的情况下)。
In addition, the widening rift with the US, has triggered a decoupling of sorts between the worlds’ two biggest economies. The US crackdown on Chinese technology companies like Huawei is pushing China towards self-reliance on key technologies, such as semiconductor technology.
此外，中国与美国之间日益扩大的分歧，引发了全球最大的两个经济体之间的某种脱钩。美国对华为等中国科技公司的打击，正推动中国在半导体技术等关键技术上实现自力更生。
Stephen Olson, a research fellow at the Hinrich Foundation, observes that “a new era in trade” is coming. “The trade landscape China will have to navigate henceforth will be considerably less benign than the one it traversed for the past two decades.” The DCS is also a signal that the Chinese leadership is prepared for the “new reality”.
辛里奇基金会研究员斯蒂芬·奥尔森（Stephen Olson）认为“贸易的新时代”正在到来。“与过去20年相比，中国今后必须驾驭的贸易格局将明显不那么温和。'双循环'也是一个信号，表明中国领导人准备迎接'新现实'"。
What will be China’s next steps under DCS?
在"双循环“背景下，中国下一步将采取什么措施?
The details of China’s dual circulation strategy have not yet been unveiled. What is certain, however, is its desired outcomes.
中国的双循环战略细节尚未公布。然而，可以肯定的是它所期望的结果。
That is to say that in order to achieve a more sustainable long-term economic growth of China and hedge against the impact of external shocks – the world’s second-largest economy will focus on building an unblocked “internal circulation” of domestic production, distribution, and consumption instead of over-dependence on the “external circulation” of the global market. The disclaimer, of course, being that China will not simply forsake the export goose that once laid it golden eggs.
也就是说,为了实现更可持续的长期经济增长的中国和抵御外部冲击的影响——这个世界第二大经济体将专注于建立一个畅通无阻的“内循环”的国内生产、分配和消费,而不是过分依赖全球市场的“外部循环”。当然，有免责声明称，中国不会简单地放弃这只曾经给自己“下金蛋的出口鹅”。
Boosting domestic demand
扩大内需
China has been conducting domestic reforms for boosting private consumption for years, and this has been reignited by the impact of recent external ripples in the global economy.
多年来，中国一直在进行促进私人消费的国内改革，而最近全球经济外部波动的影响又重新点燃了这一动力。
Key projects in this regard include faster reform of China’s land and residency (Hukou) system, which is the ongoing urbanization program, to turn millions of migrant workers into city dwellers. This will be overcoming a key obstacle to building a highly consumer-driven economy. It would also involve materially tackling a yawning inequality gap that has weighed on local spending capacity by deepening the social safety net and via poverty alleviation campaigns.
以及正在进行的城市化计划——户口制度，将数百万农民工转变为城市居民。这将克服建立一个高度消费驱动型经济的一个关键障碍。它还将涉及通过深化社会保障网络和扶贫运动，实质性地解决日益扩大的不平等差距，这一差距已拖累了地方支出能力。
China is already a “hyper-sized” consumer market with 1.4 billion people. Although its private consumption is lagging behind production amid unemployment and economic uncertainties due to COVID-19, its 400-million-strong middle class is steadily growing and offers extraordinary market potential.
中国拥有14亿人口，已经是一个“超级大”的消费市场。尽管由于疫情耳导致的失业和经济不确定性，其私人消费滞后于生产，但其4亿多中产阶级正在稳步增长，并具有巨大的市场潜力。
Under this trend, we expect opportunities in areas like health services and pension provision, as well as in the upgrading and digitalization of supply chain networks and the e-commerce industry.
在这一趋势下，我们期待医疗服务和养老保险等领域的机会，以及供应链网络升级和数字化和电子商务行业的机会。
Focusing on strategic chock-point sectors
重点关注战略性关键行业
The other key element of DCS will be “reducing risks tied to import dependency”. As a report by The Economist Intelligence Unit analyzes, “technology, energy, and food will be the sector focus.”
“双循环”的另一个关键要素将是“降低与进口依赖相关的风险”。正如经济学人智库的一份报告所分析的那样，“技术、能源和食品将是这个行业的焦点。”
Tensions with the US have exposed the vulnerability of China’s supply chain – China relies on US$300 billion worth of imported semiconductors to meet over 85 percent of its domestic market demand. Thus, of all sectors, technology is poised to receive the most overt support for achieving self-sufficiency, with semiconductors or integrated circuits (ICs) getting the most attention. In fact, this August, China announced corporate income tax (CIT) breaks for IC and software companies.与美国的紧张关系暴露了中国供应链的脆弱性——中国依靠价值3000亿美元的进口半导体来满足超过85%的国内市场需求。因此，在所有的部门中，技术将获得实现自给自足的最明显支持，其中半导体或集成电路(ICs)得到的关注最多。事实上，今年8月，中国宣布对IC和软件公司减免企业所得税。
In the energy sector, in 2019, almost 85 percent of China’s oil consumption and over 40 percent of gas consumption was derived from imports. Although China is less dependent on the US in this sector, compared with technology, recent geopolitical tensions have raised concerns about potential disruption to energy shipments. The key to avoiding this hidden danger is encouraging renewables and diversifying international relations in the energy sector, which could increasingly be pursued under the umbrella of the Belt and Road Initiative (BRI).
在能源领域，2019年，中国近85%的石油消费和超过40%的天然气消费来自进口。尽管与技术相比，中国在该领域对美国的依赖程度较低，但最近的地缘政治紧张局势引发了人们对能源运输可能中断的担忧。避免这一隐患的关键是鼓励可再生能源，以及能源领域国际关系的多元化，这可以在“一带一路”倡议的框架下逐步实现。
In the food sector, it is forecasted by the Chinese Academy of Social Science that there could be a production shortfall of 25 million tons in wheat, corn, and rice by 2025 in China. The possible shortages in food supply would affect food prices and risk social stability. Due to rural labor shortages, lower agricultural productivity, and slow progress in rural land reform, China still relies heavily on imported foods, especially soybeans, imported seeds, and foreign planting and processing technology. Here, US farmers will enjoy some short-term opportunities, derived additionally from the agricultural product purchasing agreement set out under the phase one trade deal. But, over the longer term, China will be keen to tap into a diversified group of suppliers, which should yield opportunities for farmers in Europe, Latin America, and those who are part of the BRI.
在食品领域，据中国社会科学院预测，到2025年，中国的小麦、玉米和大米将出现2500万吨的生产缺口。食品供应可能出现短缺，这将影响食品价格并危及社会稳定。由于农村劳动力短缺，农业生产率较低，农村土地改革进展缓慢，中国仍然严重依赖进口食品，特别是大豆，进口种子，以及外国种植和加工技术。在这方面，美国农民将享受一些短期机会，这些机会还来自第一阶段贸易协议中制定的农产品采购协议。但从长期来看，中国将热衷于开发多元化的供应商群体，这将为欧洲、拉美和“一带一路”沿线国家的农民带来机遇。
How will DCS impact China’s foreign investment environment?
双循环战略将如何影响中国的外商投资环境?
China’s DCS is currently vaguely defined, but it is expected to be fleshed out in more detail soon, in the upcoming 14th Five-Year Plan (2021-2025). Given its outsized role in global trade, a minor shift in China’s trading patterns could elicit huge effects. Therefore, foreign investors engaging in this market should stay abreast of the latest developments and assess exposure to possible consequences.
中国的发展中国家目前的定义很模糊，但它有望在即将到来的第14个五年计划(2021-2025)中得到更详细的充实。鉴于中国在全球贸易中扮演的巨大角色，中国贸易模式的微小转变可能会引发巨大影响。因此，参与这个市场的外国投资者应了解最新的发展情况，并评估可能产生的后果。
So far, we believe that China will see this time as a critical chance to deepen market-oriented reforms. This would address concerns on the allocation of production factors (land, labor, capital, and data) in the market, further gearing local producers to meet growing domestic demand and expand industrial output for both the domestic market and exports. For key sectors tied to national security, such as technology, energy, and agriculture sectors, China’s policymakers are expected to encourage more rapid foreign investment in high-end manufacturing and R&D besides supporting the diversification of global supply chains.
到目前为止，我们相信，中国将把这一次视为深化市场化改革的关键机会。这将解决生产要素(土地、劳动力、资本和数据)在市场中的配置问题，进一步促使国内生产商满足不断增长的国内需求，并扩大国内市场和出口的工业产出。对于技术、能源和农业等与国家安全相关的关键领域，中国的政策制定者预计将鼓励外国更快地投资高端制造业和研发，同时支持全球供应链的多元化。
Considering factors, such as China’s huge domestic market, comprehensive supply chain network, and strong business ecosystem on one hand, and the rising labor cost and aging population on the other, many foreign investors are adopting “in China, for China” and “China plus one” strategies to tap into China’s market demand growth while also lowering costs, diversifying risks, and accessing new markets.
考虑因素,如中国巨大的国内市场,全面的供应链网络,和强大的商业生态系统,一方面,劳动力成本上升和人口老龄化,许多外国投资者采用“在中国,对中国”和“中国+ 1”战略进入中国市场需求增长的同时降低成本,分散风险和访问新市场。
Although for some investors, managing exposure to pressures in home markets will be the overwhelming challenge in the short term, there is still great opportunity in China and Asia whose economies account for some of the strongest growth engines in the world.
尽管对一些投资者而言，短期内管理国内市场的压力敞口将是巨大的挑战，但中国和亚洲仍有巨大的机遇。中国和亚洲经济体是全球最强劲的增长引擎之一。
Reference:
1) What is China’s Dual Circulation Strategy and Why Should Foreign Investors Take Note?. September 25, 2020. https://www.china-briefing.com/news/what-is-chinas-dual-circulation-strategy-and-why-should-foreign-investors-take-note/