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US-China trade

For, by, and from the Party: Defining the parameters of Dual Circulation

Published 14 September 2021

China's Dual Circulation Strategy (DCS) does not necessarily mean the country is lurching to autarky. Instead, China is likely to move towards import substitution wherever possible in the pursuit of economic resilience. Such a move will come at a cost, and its ramifications for the global economy, the domestic private sector, and foreign companies in China could prove very far-reaching.

When the phrase “Dual Circulation Strategy” (DCS) entered the lexicon of China’s economic policy in May 2020 following the meeting of the Politburo standing committee, it was not clear what the strategy might entail. Consequently, substantive commentary about the potential impact of DCS on China’s growth or engagement with the outside world has been scarce.

A plethora of more recent policy announcements provide the world a better idea of what the DCS might mean, putting forward some fundamental questions: What is Dual Circulation Strategy? What are its objectives? What are the ramifications of its implementation for China and the rest of the world?

This paper by Hinrich Foundation Research Fellow Stewart Paterson attempts to answer these questions by placing the Chinese Communist Party's (CCP) economic planning and policymaking process in the context of the country’s overall political and economic structure. The analysis briefly looked at China's previous policy drives and slogans, and their impact on the direction of development. Finally, it examines the different directions DCS could take, as well as its likely impact on the country's growth and its economic and political system.

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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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