MNI POLICY: China To Boost Home Market, Push East Asia Trade

China should focus on boosting domestic demand, including boosting consumption and private investment, at the same time stabilizing foreign trade and investment particularly with the East Asia, promoting the "dual circulation" proposed by the country's senior leaders, former officials and government advisors said at a meeting on Friday.

China's new strategy of establishing a "dual circulation" model, which would prioritize "internal circulation" and be supplemented by "external circulation" does not mean turning away from the international market, Wang Yiming, former deputy director of the Development Research Center of the State Council said at a meeting held by China Center for International Economic Exchanges.

"China is deeply integrated into globalization," said Wang, "Even if it leans more on the domestic market, it still needs the support of global supply chains." The country's technology progress can't do without joining global cooperation and competition, Wang added.

Wang noted optimizing the "internal circulation" of the economy actually requires a higher level of opening up. China should focus on retaining existing foreign companies in China with better business environment, developing the East Asian market especially emerging markets in the Belt and Road countries, further opening the service sector especially telecommunication and medical care for foreign investors in the second half, according to Wang.

Jiang Zengwei, former vice minister of commerce agreed that China should accelerate promoting economic cooperation in East Asia and push the Belt and Road initiative to deal with the increased regionalization of supply chains since the outbreak of the coronavirus pandemic. Both advisors agreed it is urgent for China to foster domestic suppliers of key products like chips.

As for boosting domestic consumption, both advisors think the key is to increase household incomes. Jiang suggests raising the threshold of levying personal income tax and improving society security and public services of health care and education. Wang thinks it should be combined with policies to create more jobs, stimulate spending and accelerate the recovery of the service sector.