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In search of certainty amid uncertainties

By XIAO HUILIN | China Daily Global | Updated: 2020-07-29 08:12
SHI YU/CHINA DAILY

Double circulation pattern balances self-reliance with interdependence

The outbreak of the COVID-19 pandemic has caused the global economy to slump. It has coincided with the moment when China's economy is in transition between old and new growth drivers and developing toward higher-quality growth. Given this, the "double circulation "development pattern points out the direction for economic development.

The new development pattern is one dominated by domestic economic circulation and facilitated by circulation between China and the rest of the world, thus forming anew internal and external balance. Due to the obvious changes in the external environment, the country can no longer rely on the processing trade and exports. In the long run, enterprises will have to depend on domestic demand and strengthen their independent innovation capabilities to increase the supply of original technologies, thus enabling China's industrial chain to be upgraded. This means forming a virtuous cycle of consumption, investment and foreign trade, with the focus on overcoming structural imbalances and developing a more closely integrated domestic market. The mutually reinforcing "double circulation "pattern is conducive to alleviating the pressure on the country's supply chains.

Based on the "double circulation "pattern, new infrastructure is necessary. During the prevention and control period of the pandemic, offline activities have been greatly restricted. However, many new business forms such as non-contact distribution, teleworking, online education and online diagnosis have boomed, providing support and security guarantees for people's work and life amid the prevention and control measures implemented to curb transmission of the virus.

Although these may seem just contingency measures, they represent a long-term means to open up new markets, create new demand, promote high-quality economic development and improve people's well-being.

The new infrastructure is conducive to building the new "double circulation "development pattern.

The intelligent machines of the industrial internet are conducive to improving the efficiency of enterprises' supply and enhancing their abilities to resist risks. In terms of boosting domestic and international circulation, information infrastructure can expand domestic demands, boost employment, enhance supply capacity and promote international trade.

Building a digital foreign trade service platform is an effective way for small and medium-sized enterprises to get out of their predicaments, and is also a powerful means to promote the transformation of trade methods and industrial upgrading. For example, the electronic World Trade Platform (eWTP) initiated by Alibaba takes advantage of the large e-commerce network space and low entry costs to enable SMEs and less-developed countries to participate widely in the global value chain, which is conducive to the development of trade relations with countries involved in the Belt and Road Initiative, opening up the Asian, African and Latin American markets, and accelerating the implementation of the "double circulation" mode.

Giving full play to the advantages of innovative infrastructure for product development, technology development and scientific research will help facilitate the "double circulation "pattern by bringing the new infrastructure into full play, assisting key R&D endeavors, enhancing the country's independent innovation capabilities and introducing international high-quality talent and resources.

In terms of domestic circulation, the establishment of innovative infrastructure to help support key R&D links can reduce China's dependence on foreign countries for core technologies. The country should make good use of its huge market scale advantage and vigorously develop innovative infrastructure. The central government should design a good top-level plan, and the localities can release their potential according to their own resources. For example, Shanghai has leveraged its strengths and technology to establish the nation's first artificial intelligence industry empowerment center, and the Guangxi Zhuang autonomous region has taken advantage of its location to build a China-ASEAN information platform.

In terms of international cooperation, the implementation of construction on the basis of innovation attracts international and domestic social capital, as well as the investment of productive factors such as advanced equipment, cutting-edge technology and high-level personnel, which promotes international cooperation and effectively accelerates the "double circulation".

The new infrastructure should promote the free flow of productive factors, benefit people's livelihoods, and provide protection for the "double circulation "pattern. Intercity high-speed railways and the new energy charging stations reflect the value of new infrastructure, and are also of great significance in helping the "double circulation "new development pattern. In the domestic aspect, it is possible to accelerate the free flow of productive elements based on integrated infrastructure, promote the integration of resources within the city circle, improve the efficiency of people's travel, and enhance their happiness. For example, the construction of the intercity rail transit network in the Pearl River Delta region can further promote the circulation of productive factors between regions, benefit local people, and inject vitality into the development of the "double circulation" mode. By January 2020,531,000 public charging piles and 712,000 private charging piles have been built, with a vehicle-to-pile ratio of 3.5:1.

As the current hot investment field, new infrastructure needs to pay attention to two investment risk issues. One is that the new infrastructure has a high uncertainty of return on investment, which may easily lead to excessive investment risk; the second is that the new infrastructure has a very wide coverage, which may lead to the risk of inefficient investment. Therefore, there must be overall planning and coordination before investing, as well as comprehensive assessments of market demand and effective utilization.

The author is vice-dean of the School of International Development and Cooperation at University of International Business and Economics and deputy secretary-general of the China Association of International Trade under the Ministry of Commerce of the People's Republic of China. The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.

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