• By The Financial District


China is recalibrating its economy and laying the groundwork for reduced dependence on exports and greater reliance on domestic spending to sustain its growth, former South China Morning Post editor-in-chief Wang Xiangwei wrote in his opinion piece “Under US pressure, China is preparing an economy that can survive a protracted war” in the August 15, 2020 issue of the newspaper.

Wang said the crafting of a new economic plan for 2021 to 2025 started in earnest in 2018 but work was adjusted as US President Donald Trump launched the trade war against China, citing unfair trade practices and theft of intellectual property. In reaction, Chinese President Xi Jinping stressed that China needs to prepare for a new global situation where “unprecedented changes are taking place which have not been seen in the past 100 years” and urged them to have a mentality for “fighting a protracted war.”

Wang added: “It is in this context that the Chinese leadership has decided to push for an economic pivot by reducing its reliance on global trade and focusing on rebuilding supply chains and boosting the domestic economy for sustainable growth. The new national development strategy, known as ‘dual circulation theory.’ was first put forward by the leadership in May. It envisions a new economic pattern to be dominated by domestic economic circulation and facilitated by circulation between China and the rest of the world. The dual circulation strategy is expected to be fully fleshed out in the new five-year plan.”

He said China is expected to set a lower economic growth target of 6 per cent or even less, compared to the average growth rate of 6.5 per cent in the current five-year plan. Second, boosting innovation capacity and breakthroughs in core technologies to promote self-reliance and reduce the copying of foreign research output will be one of the key features in the new plan. This means intensifying research and development (R&D), which accounted for a measly 2.19 percent of China’s gross domestic product (GDP) in 2019, missing the target of 2.5 percent set for the current five-year economic plan, Beijing also missed the target in the previous plan, which explains why it is lagging behind in the production of advanced microchips for smartphones and 5G networks and has been egregiously copying foreign technology and depending on reverse engineering to produce warplanes and missiles, a scheme that infuriates Russia, a major arms supplier.