China’s new dual circulation model has raised questions about the country’s role on the global stage but speakers in the latest Europe-China Dialogue debate insisted the world’s second biggest economy remains open for business and the new model will bring increased opportunities for domestic and international investors.
“We would like to create a new development paradigm in which the domestic circulation will be the mainstay and the domestic and the overseas circulation reinforce each other,” (10:10) said Fei Shengchao, Minister-Counselor of the Chinese Mission to the European Union. “This will create huge opportunities for both China and Europe to tap into in the coming months and decades.”
Fei spoke at a Friends of Europe’s online event that formed part of the Europe-China Dialogue, a series of debates looking at the political, economic and social facets of the relationship between Europe, China and other Asian nations.
The dual circulation model was presented in China’s 14th Five-Year Plan which was approved on 11 March by the National People’s Congress in Beijing. Fei explained how it represents a transition for China from ‘high-speed growth to high-quality development’. (7:06)
He said the plan was based on development that is innovative, coordinated, green, open and shared. It offers many opportunities to find common ground between China and Europe, he added. (7:44)
Eva Valle Lagares, Head of Trade at the Delegation of the European Union to China, said it was good that China has adopted an ambitious strategy, but she cautioned that the means deployed for that strategy, ‘need to be transparent and fair’ and with ‘equal conditions for all’. (22:23)
Valle Lagrares expressed concern that the policy could shut out European companies. “We hope it will not end up in a full-scale decoupling … and hopefully will not result in isolation,” (21:21) she explained. “That is not something that we would like to see.”
She also urged a relaxation of the conditions faced by European investors in China, greater transparency and progress on issues such as forced technology transfers and intellectual property rights.
Several participants raised questions about the tense political context which has seen the EU impose sanctions against Chinese officials, which it accuses of involvement in human rights abuses against the mainly-Muslim Uighur minority in China’s Xinjiang region. China has responded with sanctions on European officials.
Sanctions are the wrong approach said Feng Yue, Associate Professor at the School of International Studies at the University of International Business and Economics, Beijing. “These have made the situation worse; these are never what we want,” (52:38) she said, warning that a prolonged political dispute could impact on public opinion and lead to a ‘business deterioration’.
“China is different from Europe, so I think the EU should not force China to do what you want,” Feng added. “We need more understanding, and China-EU relations are at a very delicate stage.” (53:08)
Looking beyond the political tensions, Huang Ping, Member of the Chinese People’s Political Consultative Conference (CPPCC) and Executive President of the Chinese Institute of Hong Kong, said outside investors could benefit from the development of China’s interior through the new focus on domestic markets under the new model.
“Dual circulation, even as a new concept, provides more opportunities for investment and development for both China and outside,” (48:10) he said.
“Within China, we need a more integrated, more balanced development, for employment, for growth,” Huang added. “Dual circulation is actually an overlapping way of developing the economy and therefore also opening the inland toward the outside, that can also be an opportunity for investors and developer as well as consumers … there will be a more open China for all of us.”
Participants from China and Europe looked to climate change as one key area where cooperation presents a win-win opportunity. Alexander Fisher, Director for Biodiversity, Climate and Environment at GIZ China, the German development agency, said the 14th Five-Year Plan combined with China’s goal of hitting peak emissions before 2030 and carbon neutrality by 2060 were a ‘game changer’. (31:40)
“The dual circulation and the more inward focus for lifting the quality of production, industry, the way people live … a more sustainable and carbon-friendly approach,” (33:07) Fisher said. “With the 14th Five-Year plan and this carbon neutrality goal and the stepping up of the inward-looking (approach), China acknowledged, without clearly saying it, that they are leaving the status of developing country to become a middle-income country.”
China’s 14th Five Year Plan heralds the country’s pursuit of new avenues for growth. Articulated around concerns of economic development, technology, business reforms and green production, the strategy extends until 2025 and will accompany China throughout its recovery from the pandemic crisis, shifting the spotlight to the country’s sustainable yet rapid growth and global leadership potential. With emphasis placed on a new ‘dual circulation’ model, President Xi has noted that, in the new plan, ‘twin domestic and international circulations would mutually reinforce each other, but with the larger domestic circulation as the principal focus’ – different phrasing, but a concept not entirely dissimilar from Europe’s own pursuit of strategic autonomy. But what impact will this have on trade and geopolitical relations, with both Europe and other international actors? Increased domestic consumption in China will inevitably bring about increases in international trade flows, but with the pandemic having shown the global interdependency of supply chains, could ‘dual circulation’ be a first step on the road to decoupling?
This debate is part of the Europe-China Dialogue, a series of debates looking at the political, economic and social facets of the relationship between Europe, China and other Asian nations.
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Minister-Counselor of the Chinese Mission to the European Union
Associate Professor at the School of International Studies at the University of International Business and Economics, Beijing
Member of the Chinese People's Political Consultative Conference (CPPCC) and Executive President of the Chinese Institute of Hong Kong
Director for Biodiversity, Climate and Environment at the GIZ China
Eva Valle Lagares
Head of Trade at the Delegation of the European Union to China
Chief Operating Officer and Chief Spokesperson of Friends of Europe
Feng Yue has extensive experience discussing the Chinese economy, having served as a diplomat on economic affairs in Brussels from 2012 to 2017. Her latest book, “Business Environment in the EU”, was published in 2020 and she has also been featured in the Journal of International Trade. Previously, she was an exchange scholar at the University of Maryland and in 2011, she was recognised as a business journalism fellow by the Donald W. Reynolds National Center for Business Journalism at Arizona State University.
Huang Ping is a Senior Research Fellow and Professor at the Chinese Academy of Social Sciences (CASS) and the head of the Chinese Institute of Hong Kong, the CASS institute in Hong Kong. Huang is also a member of the CPPCC, an advisory body to the Chinese government, essential to policymaking. He holds a number of high-ranking positions, most notably serving as the President of the Chinese Association of World Politics and Chairman of the Chinese Association of Cultural Exchange and Cooperation. Huang’s major research areas include social development, globalisation, Chinese relations with the US and Europe, as well as Hong Kong-Taiwan studies.
Alexander Fisher supervises a variety of bilateral projects, funded by the German government under the International Climate Initiative, in the field of climate change, biodiversity and the environment. Additionally, he is responsible for the coordination of mechanisms for regional and global projects on climate change and biodiversity. Fisher is also an Advisor for the Climate Governance Special Policy Study Group at the China Council for International Cooperation on Environment and Development (CCICED). Prior to these positions, he served as an advisor to the International Climate Finance & International Climate Initiative Division of the German Federal Ministry of the Environment, Nature Conservation and Nuclear Safety (BMU) and as the administrative director of the German Institute for Economic Research (DIW Berlin), a leading German economic policy research institute.
Eva Valle Lagares is an experienced trade specialist, having worked on trade for nearly a decade. She promotes a broad vision and considers linkages across various policies, which are essential for a partner as big and multifaceted as China. An expert in strategy work, she is the former head of the China desk of the Directorate General for Trade of the European Commission in charge of coordinating EU trade and investment relations with China. She was also the head of trade section at the EU Office to Hong Kong and Macao. Engaged in promoting equality and committed to supporting women in the workplace, she founded the Women in Trade Network in Brussels.
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