China to form new development pattern centered on "internal circulation"

China will form a new development pattern centered on "internal circulation," and speed up a "dual circulation" growth model in which "internal circulation" and "international circulation" promote each other, said the Political Bureau of the Communist Party of China (CPC) Central Committee during a meeting convened on July 30.

The meeting studied the current economic situation and made arrangements for the economic work for the second half of the year.

The meeting pointed out that the current economic situation remains complicated and challenging with unstable and uncertain factors. Since many problems China faces are long- and medium-term, resolving such problems is like fighting a protracted war, said the meeting.

The meeting demanded the country to establish a medium- and long-term coordination mechanism for COVID-19 control and economic and social development, keep its strategies in restructuring, rely on technological innovation, improve cross-cyclical macro-control design and regulations, and realize long-term balance between growth stability and risk control.

"To accelerate the forming of a new development pattern centered on 'internal circulation' is to expand domestic demand as soon as possible in an attempt to maintain the sound momentum of work resumption, as well as to realize a quick economic recovery," said Yang Guangpu, associate research fellow with the Department of Macroeconomic Research, Development Research Center of the State Council.

Guo Liyan, a research fellow with the Academy of Macroeconomic Research affiliated with China's National Development and Reform Commission, believes that the super large market is an important advantage and support of China to participate in the reshaping of the global competition pattern. Only by transforming the huge market potential into actual demand and accelerating the building of a modern economic system can China enhance the appeal and influence of its domestic market.

Taking the domestic market as the mainstay is absolutely not an operation behind closed doors. China will release the potential of its domestic demand, better connect the domestic and international markets, and make better use of the two resources, to realize robust sustainable development.

"What China will build is not a simple and unconditionally open system, but one that is more diverse, balanced, secure and efficient. Such a new system must be built based on stability, or the efficient internal circulation," said Liu Yuanchun, Vice President of the Renmin University of China.

Proposing to establish a medium- and long-term coordination mechanism for COVID-19 control and economic and social development, the meeting released a positive signal to the market, which will stabilize expectation, Yang analyzed.

China's private investment contracted 7.3 percent in the first half of this year. The decrease narrowed 2.3 percentage points from that in the January-May period, but was still 4.2 percentage points down when compared with the fixed-asset investment growth.

"The medium- and long-term coordination mechanism will keep improving targeted epidemic control measures and reduce the impacts from COVID-19 on businesses to the utmost extent," Yang said.

China issued one trillion yuan of special anti-pandemic government bonds, encouraged financial institutions to provide 1.5 trillion yuan worth of benefits to firms through cuts in interest rates and other methods, and cut over 1 trillion yuan of tax and fee.

The timely hedging measures taken by China since the onset of COVID-19 to help enterprises, stabilize employment and expand domestic demand have offered a strong foothold for stabilizing the economy.

"Risks are always exposed in a hysteretic manner, and as the economy gradually recovers, macro regulation should be more prudent," said Liu. The meeting stressed that financial policies shall be more result-oriented, and monetary policies shall maintain a reasonable growth of money supply and social financing, which will help realize long-term balance between growth stability and risk control, he added.