China is set to announce its 14th Five-Year Plan (2021-25) at an important point in time. This will be the first plan to be announced at a time when China is close to achieving its first centennial goal of building a moderately prosperous society in all respects and eliminating absolute poverty by the end of this year. It will also be the first five-year plan to take China toward its other major centennial goal of building a great, modern, socialist country by 2049.
There are several other factors that make the timing of the 14th Five-Year Plan significant. The world is struggling to cope with the COVID-19 pandemic. This is the worst global public health crisis since the 1918 flu pandemic. COVID-19 has made countries, particularly large populous ones like China to align public policies with a key focus on managing pandemics, by ensuring all people have affordable access to vaccines and medicines.
But COVID-19 has also brought about significant changes in the global economic order.
The disruptions caused by the COVID-19 outbreak to global supply chains have driven home several lessons. Global production networks can no longer function on the basis of just efficiency. These networks have developed for different industries on the basis of value addition that can be obtained by fragmenting production across different locations. But as cross-border flows of goods to be processed get disrupted, supply chains break down.
Countries, as a result, are beginning to more closely focus on the importance of having supply chains that would be less prone to sudden disruptions, which mean serious economic setbacks for businesses, small enterprises and customers.
For a country such as China, whose businesses are deeply integrated with various supply chains, it is important to reflect on the disturbances and disruptions. This is probably what has influenced the "dual circulation "development pattern, which is likely to be made part of the 14th Five-Year Plan. The "dual circulation" development pattern is centered on the domestic economy (or "internal circulation") and aims to integrate the domestic economy with the global economy (or "external circulation").
Details of "dual circulation" are yet to be known. There is, however, much speculation on what it will be. From the discussions on the policy, it appears that it will serve two purposes simultaneously.
There will be policies aimed at "external circulation". Such policies will equip Chinese producers and businesses to adapt the best from global conditions. At the same time, there will also be "internal circulation", which means more efforts will be made to boost domestic demand and make domestic businesses, enterprises and households more resilient and self-sufficient.
One of the likely implications of "dual circulation' is the shift in emphasis from export promotion to import substitution. China has, for several years now, been the world's largest exporter. It produces a wide range of goods at competitive rates for countries and regions across the world. Its ability to produce goods in such huge quantities at competitive rates has made consumers from many countries, particularly the United States, realize the benefits of importing goods from China, rather than making them at home.
China's focus on producing goods for the world has also made it reliant on imports, especially for medicines and some agriculture products. The importance of having ready access to such products has been highlighted during the COVID-19 pandemic. Similarly, there are probably other products in which the Chinese economy is vulnerable to disruptions created by pandemic-like situations, or other crises in the rest of the world. China's exports, too, have become vulnerable to fluctuations in external demand.
"Dual circulation" might be an attempt to ensure that China does not suffer because of its dependence on the rest of the world. It would look at policies, particularly in high-tech and other critical fields, where the country is able to produce most of what it requires without being significantly dependent on other countries.
While focusing on self-sufficiency, it reiterates the importance of higher level-opening up. But it is also important to note that economic globalization itself is undergoing multiple changes. Countries are increasingly making their own national interests more important than taking part in pre-determined and pre-structured institutional mechanisms, such as that of the World Trade Organization.
In such a situation, countries need to review their approach to globalization. This is particularly true for the world's most populous country China.
The author is a senior research fellow and research lead (trade and economics) at the Institute of South Asian Studies in the National University of Singapore.
The views don't necessarily reflect those of China Daily.
HONG KONG NEWS