China’s commerce ministry will focus on domestic consumption next year as the trade war with the United States falls down the list of priorities.
A statement about its nationwide work meeting on Saturday, the first meeting chaired by the new minister Wang Wentao, stressed the importance of the domestic market, a key element of the new dual circulation strategy.
The ministry said: “We will step up domestic demand, try to drive up consumption potential, build a modern circulation system, clear obstacles to domestic circulation and eventually form a strong domestic market.”
The appointment of Wang, the former governor of Heilongjiang who had previously spent two decades in Shanghai, the country’s biggest economic hub, was approved by the Standing Committee of the National People’s Congress earlier on Saturday. He replaces Zhong Shan, who is retiring at the age of 65.
This year has proved to be a good one for China’s export machine despite the shock caused by the Covid-19 pandemic at the start of the year.
China’s exports quickly rebounded as the country brought the coronavirus under control while other major economies suffered.
In November, exports jumped by 21.1 per cent compared with the same month last year, the fastest pace in more than two years, to US$268 billion, while the January-November total rose by 2.5 per cent to US$2.32 trillion.
It helped to lift China’s gross domestic product growth to 4.9 per cent in the third quarter.
The ministry said China has consolidated its status as a major power in trade, foreign investment and global governance in the last five years.
The ministry also said it would seek to stabilise trade relations with traditional key partners and “deepen cooperation with Belt and Road countries, and strengthen bilateral cooperation on a higher level opening-up platforms”.
The commerce ministry will also be the key agency pursuing the country’s goal of joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
The focus on domestic demand in the statement contrasts with last year’s statement, which focused on efforts to resolve the trade war with the US.
However, uncertainties in the global economy and the policies adopted by the new Biden administration will continue to have an impact on China’s foreign trade and investment, and the dual circulation strategy is one way of offsetting these potential problems by making domestic demand a key driver of development over the next 15 years.
“A surge in foreign demand for Chinese-made goods caused by the pandemic remains a tailwind as shifts in global consumption patterns persist due to renewed virus flare-ups,” Julian Evans-Pritchard, a senior China economist at Capital Economics, wrote in a note earlier this week.
“We expect growth to remain above-trend for a while … There is still plenty of room for domestic consumption to accelerate as households run down the excess savings they accumulated this year.”
Dong Chen, senior Asia economist at Pictet Wealth Management, wrote in a note: “Compared to the strong rebound in exports and manufacturing, the recovery of domestic consumption in China, especially of services, has been relatively slow. But in 2021 we expect household consumption to catch up as Covid-19 concerns fade and government stimulus targets households.”
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