At a time when the global economic recovery was complicated by the unabated COVID-19 pandemic and anti-globalisation sentiment, China brought to the table a new development pattern.
During a symposium with entrepreneurs last week, Chinese President Xi Jinping stressed the need to give full play to the advantage of a huge domestic market, so that a new development pattern will gradually be created whereby domestic and foreign markets can boost each other, with the domestic market as the mainstay.
Analysts say the new development pattern charts the course for China’s high-quality economic development, which requires stronger endogenous driving forces amid mounting external uncertainties.
Domestic Market as Mainstay
Boasting the world’s largest industrial system, China has over 123 million market entities and over 170 million skilled professionals, as well as a population of 1.4 billion that includes 400 million middle-income earners, which makes it a necessity for the world’s second largest economy to make the domestic market a mainstay of the new development pattern.
China has worked to tap the potential of the domestic market from both the demand side and the supply side.
On the demand side, the country pledged to unleash the potential of consumption by stimulating consumer spending and increasing public spending, as well as expanding investment in infrastructure and emerging strategic industries.
The commitment was evidenced in the annual government work report released in late May, which gave priority to stabilising employment and ensuring living standards against the COVID-19 epidemic’s economic fallout, urging efforts to boost consumption and expand investment in a mutually reinforcing way.
As the epidemic slowed business activities and dented the job market, China slashed fees for firms to help ensure they keep employees on the payroll, having refunded 63.6 billion yuan (about 9 billion U.S. dollars) to over 4.3 million firms in the first half of this year and benefited around 100 million people.
Official data showed that China’s surveyed unemployment rate in urban areas stood at 5.7 percent in June, 0.2 percentage points lower than that of May, while a total of 5.64 million new urban jobs were created in the first half of the year, completing 62.7 percent of the annual target.
In a bid to stimulate new consumption demand and promote industrial upgrading, China has vowed to step up investment, especially in new infrastructures like 5G, AI and cloud computing. New infrastructure investment is estimated to reach 17.5 trillion yuan for 2020-2025, representing an annualised growth rate of around 21.6 percent.
A brand new information consumption market to be created by the new infrastructures will help spawn new drivers of domestic demand that can in turn stimulate the growth of infrastructure, said Zhu Keli, a researcher on the new economy with the Development Research Center of the State Council.
On the supply side, China has taken multi-pronged measures to protect the supply chain from succumbing to epidemic shocks. Building on earlier efforts to advance the resumption of production, the country has ramped up tax and fee reductions and provided firms with low-cost loans to help them tide over difficulties.
The country will be unswerving in deepening supply-side structural reforms, which will help improve the quality of the domestic economy, analysts say.
Exploring Fresh Outbound Opportunities
Chinese companies should better diversify their target markets and shift more focus to developing countries as the pandemic ravages many of the country’s traditional key trading partners, said Yan Yilong, Associate Professor with Tsinghua University.
As a transcontinental program that improves connectivity and increases trade, the Belt & Road Initiative will play a pivotal role in helping Chinese companies explore new overseas opportunities, Yan added.
During the first half of 2020, China’s trade with countries along the Belt & Road saw a slight decline of 0.9 percent year on year to 4.2 trillion yuan, 2.3 percentage points lower than the country’s overall decrease in foreign trade.
For years, China has been encouraging enterprises to expand their operations globally to better leverage external markets and resources. The trend will be accelerated over the coming years, as more companies realise the importance of a globalised approach.
Yang Yuanqing, Lenovo’s Chairman and CEO, said the new development pattern has important bearings on the country’s economic security.
The normal operation of Lenovo’s Plants in Brazil and other countries bolstered the company’s output when the epidemic erupted in China, while the subsequent recovery of domestic demand also helped strengthen its global supply chain, Yang said.
Despite the impact of COVID-19, China has reiterated that it will continue to broaden market access and open up its service sector, vowing supportive measures to shore up foreign investment and trade.
“China’s opening-up and sharing growth opportunities with other countries will also benefit its own development in turn,” Yan said.
In its latest efforts to open the economy, China unveiled a new negative list for foreign investment in late June, cutting the number of sectors that are off-limits for foreign investors to 33 from 40 in 2019.
China’s opening-up measures amid the pandemic have helped stabilise the international industrial and supply chains and promote a virtuous cycle of the global economy, said Hu Xiaolian, Chairman of the Export-Import Bank of China.