It’s Not Just the U.S. Pulling Back From the Global Economy

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China’s Politburo is not sitting idly by while Trump pushes them around. From the Nikkei Asian Review…

Why China’s ‘dual circulation’ plan is bad news for everyone else

Rebalancing in 2008 also relied on raising the contribution of domestic demand in China’s growth. It was coupled with the idea that driven by faster growth in domestic consumption, China’s long-standing current account surplus would give way to a deficit as imports increased.

This time, the notion is to ensure more of that increased demand is met by domestic production, rather than imports. In this regard, the dual circulation strategy is a corollary of the government’s previous Made in China 2025 program for upgrading China’s technological capacities as it has become possible to substitute high-end goods only due to advances in key sectors.

Putting it another way, the old rebalancing was about reducing China’s dependence on exports. By contrast, the thrust of dual circulation is about reducing dependence on imports and increasing self-sufficiency.

It’s hard to know how and when this will shake out functionally, but “Made in China 2025” sounds about right. I used to make jokes about Trump’s “bull in a China shop” methods. In a few years that may not be such a joke. Lots of moving parts here, including countries that supply high end equipment to China, like Japan and South Korea.

Is it a bluff as part of the trade war or are the Chinese, renowned for the big picture view, actually going to become at least semi-autonomous? Interesting, anyway.

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