Dual cycle model in China

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[...] Is China slowly isolating itself from the rest of the world ? Would be leading to: → increase in GDP → increase in jobs → increase in domestic investments → increase in living standards 3 Economic growth through innovation and consumption: International growth strategy Original model 1990-2010 Dual strategy model New wished model from 2020 Finished goods World's economy China's economy Raw materials, technology, investments KEY ASPECTS: exports High value goods World's economy China's economy Raw materials, low value goods KEY ASPECTS: domestic consumption + innovation About our company 5 History of dual cycle Since China's reform and opening up, the domestic and international dual cycle development model has already existed, it is only a question of which one is more important History of dual cycle 1988 - 2006 Dominated by international cycle 02 Dual cycle model Figure China's Total Export-Import Volume and FTD from 1988 to 2006 Data source: China National Bureau of Statistics 7 History of dual cycle 2006 - 2020 Adjustment of international cycle 02 Dual cycle model Figure FTD of China, USA, Japan, UK, and France from 2005 to 2019 Data source: World Bank database 8 History of dual cycle 2020 - Now Dual cycle 02 Dual cycle model Figure Contribution rate of Consumption, Investment, and Exports to China's GDP from the third quarter of 2020 to the first quarter of The necessity of Global Value Chain reshaping ● According to the International Monetary Fund's forecasts, global growth slowed from 3.4% in 2022 to 2.9% in 2023 then will rebound to 3.1% in 2024. [...]

[...] Dependance on investments Some areas in China could been left behind, especially rural areas and therefore create greater social Unequal inequalities. economic development Very industrialized areas could suffer from extreme pollution. [...]

[...] ● The longer-term cost of trade fragmentation alone could range from 0.2% of global output in a limited fragmentation scenario to almost in a severe scenario Dual circulation & the reshaping of GVC 10 The dual circulation benefits the industrial structure upgrading, thus improving China's position in the GVC Characteristics of economic growth: Growth Momentum Comparative Advantage Investment Low cost factors of production Consumption Massive domestic market Contribution of capital factors to GDP growth: 63.5% in 2001 - 31.2% in 2019 Contribution of household consumption to GDP growth: 50% in 2001 - 57.8% in 2019 China needs a new pattern that Relies mainly on domestic circulation Enables domestic and international circulations to reinforce each other 03 Dual circulation & the reshaping of GVC Domestic Demand Supply-side Structural Reform 11 The dual circulation benefits the industrial structure upgrading, thus improving China's position in the GVC Demand Side Consumption Income distribution Consumption patterns Supply Side Investment Infrastructure Rural revitalization Emerging industries Second-largest consumer market largest online retail market Supply-side Structural Reform Efficiency & Quality, Excess capacity reduction, Deleveraging, Cost reduction, Sustainability From “low-end, labour-intensive, polluting” To “high-end, technology-intensive, clean” Industrial Structure Upgrading Low-end Assembler 03 Dual circulation & the reshaping of GVC Major Exporter of Medium-and-high-tech Products 12 Conclusion - What are the possible scenarios on Chinese economy if the double cycle was not implemented ? China would stay vulnerable to changes in trade policies, fluctuation in the demand, or economic External downturn. shocks Could create asset bubble. [...]

[...] Dual cycle model in China 1 Table of Contents 01 Global Value Chains, Context & China's place History of dual cycle model China in the global economy & double cycle impacts 2 Introduction - Dual Cycle in China Global value chain: multi-country network of manufacturing process. Dual cycle model: economic strategy that aims to reduce China's reliance on exports and to boost domestic consumption and innovation. Stimulate & increase internal demand Through: → Innovation → Local consumption → Domestic supply → Regional development → Sustainable development Decrease external vulnerability to external shocks Why a such powerful country that was an export-oriented growth would want to focus on its domestic demand ? [...]