MNI POLICY: Income Boost Key to 'Dual Circulation': Advisors

Boosting household incomes is a key component of China's "dual circulation" growth model that will see the globe's second-largest economy tap into domestic drivers, State Council advisors said at a briefing on Tuesday.

China's adoption of the new dual twin aim, largely by boosting domestic consumption whilst not moving away from foreign markets, isn't just an attempt to insulate against rising protectionism and deglobalization, but a fully-fledged development plan Counsellor Lin Yifu, former chief economist and senior vice president of the World Bank.

In effect, the slogan just formalizes changed already seen in the Chinese economy, Lin said, noting the proportion of exports in the GDP data had declined to 17.4% in 2019 from 35.4% in 2006. This strategy targets China's comparative advantage of a middle-income population of 400 million currently, equivalent to that of the U.S. and Japan combined, said Yao Jingyuan, a fellow counsellor and former chief economist at the statistics bureau.

To unleash the potential demand, China should focus on reforms such as increasing urban and rural residents' salaries, improving the efficiency of market allocation of resources, encouraging innovation and making good planning of homeland, said Yao.

The senior advisors stressed the need for continued reform, particularly those that would aid the flow of young talent to more prosperous areas..

FOREX RESERVES

Under the new strategy, China's more than USD3 trillion forex reserves won't grow as quickly, as exports and imports balance out, Yao said. China will export more capital- and technology-intensive products as incomes rise, while imports of natural resources, labor-intensive and high-tech products will rise, Lin added.