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China’s radical new plan to transform its economy

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It doesn’t sound so fascinating: the fifth plenum of the 19th Communist Party of China Central Committee.

Neither did the 14th five-year plan stemming from the buffering event, which was held in Beijing at the end of last month.

But buried under the bureaucratic bump is a sweeping new plan that hopes China will catapult it into an unassailable economic position, dominating markets and being able to ignore U.S. trade disputes. It also reveals an uncomfortable truth for Beijing.

Everything revolves around two seemingly innocuous words: “dual circulation”. Like “the belt and the road”, it is a Chinese expression that may soon become very well known.

“They may not be war games, but China wants to win this battle,” a Chinese observer told news.com.au.

And it’s a battle that could have serious consequences for Australia, as our main export partner turns increasingly to the resources it needs to grow.

RELATED: China Discloses 14-Dispute File With Australia As Tensions Rise

Every five years, the People’s Republic defines a vast economic and social strategy. As a centralized communist economy, these plans can have a huge effect on daily life in China and, due to its financial might, on the world as a whole.

A pledge by Chinese President Xi Jinping to make the country carbon neutral by 2060 grabbed the headlines when the 2020-2025 plan was unveiled.

But it is the dual circulation strategy that could have a deeper effect.

“This is Xi’s solution to the United States and bilateral tensions,” Professor Jane Golley of the ANU Center on China in the World told news.com.au.

Basically, dual circulation would seek to overcome this weakness. This would divide the Chinese economy into two spheres, which would mean that it would be less dependent on overseas goods and trade.

The first “circulation” is the home economy. If this increases, the nation will be less prone to global economic shocks. Additionally, making more products at home – from semiconductors to soybeans – will mean China won’t be stuck when the United States or other countries choke off supply chains for vital products, which currently produced.

The second draw is the international economy in which China still intends to engage.

Professor Golley said that while the two circles can be close, they are also separated and the degree of interaction could increase and decrease depending on international tensions.

“China has never been as global as it is today. It is therefore not a question of completely cutting the two circles, but above all of pushing for technological self-sufficiency, in particular in sectors where there are tensions with the United States.

“There could be normal integration in times of non-crisis, but more cautious and different forms of integration in times of crisis,” she said.

This is not an entirely new theory – but it is the first time that it has been so explicitly enshrined in national politics.

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CHINA HAS BECOME VULNERABLE

Since China joined the World Trade Organization in 2001, its companies have made a big splash. Brands such as Lenovo, Huawei, China Southern and TikTok have emerged and become world famous. In Australia, Chinese companies own businesses, including EnergyAustralia and Bellamy’s milk.

But it is not all one way. As the world has become addicted to Chinese products, the uncomfortable truth for Beijing is that China has become more dependent on commodities that come mainly from overseas – soybeans from the United States, semiconductors from Taiwan and from the United States, steel and steak from Australia.

As relations with trading partners deteriorate, these vital supply chains in China have become vulnerable. The United States, for example, has restricted exports of semiconductor parts, fearing that China would acquire them under the guise of civilian use, but instead use them in military hardware.

Dual circulation would allow technological “decoupling” where China no longer depended on imports of commodities, such as high-tech components, where the United States holds many cards.

By 2035, China wants to produce many more semiconductors, crude oil, rare earths, pork, grains and more.

“This takes advantage of Beijing’s great insecurity over food and energy. They don’t grow enough food to feed their people. If the shipping lanes are blocked, they literally face a hungry population.

LOCK OTHER NATIONS IN CHINA

Some Chinese experts have said the dual circulation will also allow Beijing to exert indirect pressure on foreign governments.

Indeed, China’s remarkable recovery from the pandemic makes it an attractive place to invest for foreign companies. If foreign companies are locked into the international circuit, with all the profits and jobs that can come with it, they can put pressure on their country’s leaders to act gently with China when it comes to crises. diplomatic.

Beijing is shaping up using economic pressure on other governments. In 2017, Korean-owned stores were closed in China, and the number of Chinese tourists visiting Korea plummeted when Seoul displeased Beijing.

RELATED: America’s Cheeky Decision to Offend China

AUSTRALIA SHOULD BE CONCERNED

If the new dual circulation theory is successful, Australia could suffer economically.

China is Australia’s biggest export partner, but diplomatic relations could hardly be worse with the Chinese Embassy this week giving reporters a list of the reasons Beijing is upset, including the recklessness of the Australia having a free press.

China has started adding tariffs on some Australian products and blocking some imports.

“China was extremely offended when we rejected Huawei (to be part of the technology upgrades due to security concerns), which is seen as a source of national pride and a champion to become globally competitive,” said declared Professor Golley.

“There are still a lot of Australian products that they will continue to need in the years to come, but the long-term strategy will be to reduce dependence on us.

“China’s green growth, for example, will mean lower demand for Australian resources.”

However, Professor Golley said, there may be “new opportunities” for doing business between the two countries.

RELATED: Australia’s Historic New Defense Pact

“ A BATTLE OF TECHNOLOGICAL PRIMACY ”

Writing for the American think tank Center for Strategic and International Studies Andrew Polk and Jude Blanchette said if dual circulation were to bear fruit, the impacts on the global economy would be “significant”.

“Although Chinese policymakers and commentators have made it clear that dual circulation does not mean a large-scale pivot away from global economic integration or dependence on external demand, even a marginal shift from China away from its Concentration on mercantilist export practices could fundamentally reshape global trade and investment flows. “

Could dual circulation not only allow China to reduce its dependence on the outside world, but also to compete, or even dominate, certain industries where it has been lacking until now?

“This is the most critical question. It is a battle for technological primacy between the United States and China, ”said Professor Golley.

“It’s not a war game but they want to win this battle”.

In the past, it was assumed that China’s planned economy and its repression did not lead to innovation, and the money that flowed from it, seen in the United States and other Western countries.

And yet, the Chinese economy has continued to grow, Professor Golley said.

“China was seen as doomed to failure. But when the party brings the private sector, academia, industry and others together in one mission – and then you put a lot of money into it – you just might win.

Dual circulation may be an abstract term now, but Beijing is hoping it’s a major asset that will propel it to the top of the global economic ladder.

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