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Global Governance
Is China Really Retreating? Understanding ‘Double Circulation’ to Avoid Double Confusion

Cross-border trade and investment of the 21st century should be protected based on the principle of a level playing field and that any proposed change of the rules, if any, must be discussed and agreed upon by all stakeholders within the framework of the WTO; it should not be imposed or dictated by one country, even if it is the most powerful country, writes Nelson Wong, Vice Chairman of the Shanghai Centre for RimPac Strategic and International Studies.

In his opening address to the Shanghai Import Expo in November 2020, Chinese President Xi Jinping announced China’s adoption of the “Double Circulation” strategy which he reaffirmed should from now guide the country’s development in view of the changing situations at home and abroad. Double Circulation is a new buzzword that now frequently appears in the Chinese media and official narratives; but what does it actually mean? Those unfamiliar with China and who are often bewildered by Chinese affairs, have begun questioning whether this is a sign of China retreating from the competition and confrontation it currently has with the US, or whether China is simply making a strategic withdrawal altogether. A clear explanation of China’s strategic shift of attention is therefore necessary for all stakeholders who have a vested interest in understanding and dealing with China. 

In the context of Chinese political discourse and policy announcement, short phrases and succinct expressions are often preferred to summarise the essence of major policies of strategic importance that call for nationwide attention. Typically known for having only a few words, some of these slogans are easy to understand while others may be rather confusing to people without any knowledge of the rationale behind them or who fail to put them in a cultural and historical context. For example, back in the day when the People’s Republic of China was first established, the whole nation was mobilised to grow the economy under the motto of “Self-Reliance and Hard Struggle”, against the backdrop of the new republic being largely isolated from the rest of the world. In the 1980s, when China started its “New Long March” to modernise the country with the national campaign of “Reform and Opening-up”, a plethora of policies were introduced to turn China into the world’s manufacturing base, attracting foreign investment that would bring businesses from abroad and in turn selling the end products overseas. This approach, known as the “Double-Ends Abroad” strategy, by practically connecting both ends of the production process with the world market, proved to be successful and instrumental in increasing China’s production capacity and contributing greatly to the nation’s wealth building over the last four decades. 

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Expert Opinions

Entering into a new phase of its development, China has identified the imperative need to build a healthier and more balanced economic structure to ensure continued and sustainable growth. The “Double Circulation” strategy, or “Shuang Xun Huan” in Mandarin Chinese, was hence evolved to confirm that China’s relevance and engagement in the global economy must be maintained, while simultaneously acknowledging that more effort will be required to lay a strong and solid foundation at home that will carry the country into a more promising future. Lifting a few hundred million people out of poverty is indeed an achievement worthy of universal acknowledgment, but the Chinese government should not rest on its laurels just yet. As the dominating political force in the country, the declared mission of the Communist Party of China is to lead the Chinese people to achieve even greater success and prosperity. However, with a population of 1.4 billion and being the largest trading partner of more than 120 countries around the world, even a slight change in the country’s strategic focus will have far-reaching repercussions. 

In fact, China’s shift of strategic focus began about ten years ago, with policies designed to gradually transform the country from a manufacturing-export based and investment-driven economy, to one that would capitalise on its strong consuming power, attract top talent and encourage technological innovations. Figures from the National Bureau of Statistics show that the share of exports in China’s GDP declined from 63% in 2006 to 33% in 2019, a 30% drop within a matter of 13 years. On the other hand, ranking right behind the US as the second largest importer of raw materials, goods and services, China has now opened up its doors to welcome food and consumer products from everywhere around the world, as has been evident over the years with the annual Import Expo in Shanghai. As a further example of China’s willingness to share its wealth with the rest of the world, the number of annual outbound tourists from China reached over 150 million in 2019 as compared to a mere 5 million in 1995.
For good or bad, the growing but unwanted confrontation between China and the US in recent years, started by Donald Trump and now escalated by his successor in the White House, is a wake-up call for China to check on its preparedness for global competition, and to effectively handle the organised attacks from the US to contain China’s rise.

Moreover, the widespread pandemic has taken the world by surprise, and with it a global economic slowdown is becoming a reality, prompting many countries to take a more cautious or protectionist approach towards economic globalisation. This has triggered the resolve of the Chinese government to re-examine the country’s own economic, social and political realities to recognise what is best for the country and what needs to be reformed, corrected and enforced. As is usually expected of any leadership, common sense will always prevail when confronted with challenges and changing situations, but principles and bottom lines are not to be compromised. 

As the world’s largest developing country, China is still burdened with a multitude of problems at home that need to be dealt with. This includes the debt-stricken status at local government levels, the unequal distribution of wealth, the lag in terms of technological innovations, the long-expected reform in education and development in basic sciences, the knock-on effects and challenges as a result of the nationwide urbanisation process, the national coverage of medical insurance; and the list goes on. The central government has committed to providing constructive solutions as well as hefty investments to tackle these issues. Other challenges including regulatory controls to ensure cyber security and the stability of financial markets, the fight against corruption, separatist forces and subversion activities, as well as the strengthening of the country’s national defence capabilities, the competence and readiness to respond to natural disasters and major health issues such as the on-going pandemic, are all on top of the government’s agenda with equal importance. 

Externally, it is now practically impossible for any country including China to go back to the days of self-isolation; the entire web of our industrial setup and our supply chains are already internationalised and has become so interwoven globally that a “reset to factory mode” is not an option anymore. As a member of the World Trade Organisation, China has all along been following the rules that are set by the founding members. China has also given its support to improve or reform the WTO rules but disagrees when the US tries to bypass the WTO to create a new set of rules that discriminate against countries that have a different political system and without the “shared values”; this is logically contradictory to the spirit of fair trade.
Cross-border trade and investment of the 21st century should be protected based on the principle of a level playing field and that any proposed change of the rules, if any, must be discussed and agreed upon by all stakeholders within the framework of the WTO; it should not be imposed or dictated by one country, even if it is the most powerful country.

Every sovereign country has the right to strive for a better life for its people and this right should be respected and protected at all times, as should their choice of their country’s governance. Whilst China still has a lot to learn from the US and other developed countries, its peaceful rise has been repeatedly assured by its government and can be endorsed with a reference to the nation’s long history characterised by its unique and non-confrontational civilisation which is widely different from that of the West. The “China Threat”, as has been vigorously promoted by the US and some of its allies in recent years, is an intentionally manipulated perception to create fear with limited basis or supporting evidence. Admittedly, in the modern world that is led and dominated by Western cultures and values, China is a new comer and still lacks the experience and the required talent to engage in constructive and rational dialogues to convey the nation's good intention along with its rise. In as much as China needs to recognise the doubts and fears of others, the rest of the world also needs to accept and appreciate the challenges faced by a rising China — and to acknowledge that there is more than just the law of the jungle or a zero-sum game. China has been the most active participant in the UN peace-keeping forces for decades and is an accountable partner to tackle such common threats as terrorism, climate change and disease, as well as collaborating in scientific research, global knowledge sharing and space exploration. These facts are conveniently overlooked by the zero-sum game club.

The on-going tension between China and the US has increased the level of uncertainty for the development trajectory of the world. Responding to the increasingly provocative acts of the US, China has engaged an active defence strategy expecting to solve disputes through dialogues. But finding the right solution to break the uninvited stalemate requires both sides to be truthful to each other and to have the courage and confidence to treat the other party equally. In order to clearly set its bottom lines, China’s top diplomats have repeated on numerous occasions in their statements during the recent meetings with their American counterparts that the right for China to pursue its development and the country’s choice of its own political system must be acknowledged and respected, and that the resolve of China to defend its national security and to safeguard its sovereignty and territorial integrity should never be underestimated. What remains to be seen now, however, is the sincerity of both sides and the wisdom of their respective leadership to prevent an escalation of current tensions. 
Why Restraint Is a Virtue and a Reflection of Strength
Nelson Wong
Chinese culture favours restraint and considers self-control a virtue and a reflection of strength. Mutual respect and dialogue is by far the most advisable and practical approach to handle and solve problems or disputes, if we all believe peace and development to be the right way forward for mankind, writes Nelson Wong, Vice Chairman of the Shanghai Centre for RimPac Strategic and International Studies.
Expert Opinions
Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.