China Shifts Export-to-Domestic Strategy... "Prepared for the Worst-Case Scenario"

[Asia Economy Beijing=Special Correspondent Park Sun-mi] China is promoting a new economic development plan that focuses more on the domestic market rather than export-led growth, which is interpreted as a strategic shift in preparation for the worst economic scenario.

On the 26th, Hong Kong's South China Morning Post (SCMP) reported that there are signs China is preparing for the worst economic scenario since the COVID-19 outbreak. The recent emphasis on the domestic market over export-led growth reflects the Chinese government's strategic change to prepare for the worst-case scenario following the COVID-19 crisis.

The Chinese economy is under strong downward pressure due to the COVID-19 pandemic and the deteriorated US-China relations, which have even been described as a "new Cold War." In this atmosphere, Chinese President Xi Jinping attended the joint meeting of the economic committee at the 3rd session of the 13th National Committee of the Chinese People's Political Consultative Conference (CPPCC) on the 23rd, acknowledging that China is facing difficulties due to the global economic recession, fluctuations in international financial markets, protectionism and unilateralism by some countries, and rising geopolitical political risks.

He stated, "We must promote China's development in an unstable and uncertain world. The Chinese economy is at an important stage of transformation in its development approach, optimization of economic structure, and shift in growth momentum," adding, "China is promoting a new economic development plan where domestic circulation plays a dominant role. Going forward, China must take the domestic market as the starting point and base to accelerate the establishment of a complete domestic system."

SCMP interpreted President Xi's remarks as indicating a move away from the "great international circulation" strategy adopted in the 1990s that elevated China to the world's second-largest economy. It reported, "China had positioned itself as a manufacturing link in the global value chain under the past export-oriented strategy, but in recent years, this approach has begun to lose its luster."

In particular, China’s economy has fallen into recession with negative growth rates due to the COVID-19 crisis, and with the global spread of the virus increasing uncertainty in the world economy, along with strengthened protectionist tendencies in countries including the United States, voices calling for economic 'self-sufficiency' within China have also grown louder.

Raymond Yeung, ANZ Bank’s Chief Economist for China, explained, "China’s strategic shift reflects concerns that global demand will not recover over the next two to three years due to COVID-19." Hu Xingdou, an independent economist based in Beijing, also interpreted, "China is preparing for the worst-case scenario, including decoupling from the United States and further decoupling from the entire Western bloc."