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US-China trade

How will China’s Dual Circulation Strategy impact the global economy?

Published 12 October 2021

China's Dual Circulation Strategy (DCS) will have a marked impact on the country's international linkages. As China shifts its policy focus from market-driven economic efficiency to planned allocation, driven by the twin goals of quality growth and "National Rejuvenation", bifurcation of the global economy could result.

Announced in May 2020, China’s Dual Circulation Strategy (DCS) gives formal substance to several established trends and policies that are now being pursued by the Chinese Communist Party (CCP) with renewed vigor. China’s policy priorities appear to be moving even further away from a market driven, growth maximization inspired allocation of resources. Planned allocation is emerging as more important, driven by the twin goals of quality growth and “National Rejuvenation,” instead of high growth or economic efficiency.

This begs the question: how will DCS change the way China’s economy engages with the rest of the world? Is China likely to succeed? Furthermore, how will this approach impact the multilateral trading system and the global economy more generally?

This second report of the DCS series by Hinrich Foundation Research Fellow Stewart Paterson is divided into three parts. Part one examines the evolution of linkages between China and the global economy, and assesses how recent policy moves may be changing the extent and nature of this engagement. Part two explores how these dynamics might shift going forward. Finally, part three explores some of the macroeconomic implications of DCS under various scenarios.

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Stewart Paterson

Stewart Paterson is a Research Fellow at the Hinrich Foundation who spent 25 years in capital markets as an equity researcher, strategist and fund manager, working for Credit Suisse, CLSA and most recently, as a Partner and Portfolio Manager of Tiburon Partners LLP.

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