Dual Circulations of Domestic and International Economy: Theoretical Framework and Chinese Practice

Abstract

Facing the current anti-globalization trend of rising protectionism, sluggish international trade and investment, as well as the impact of the new pandemic on the global industrial chain and supply chain, the CPC Central Committee duly put forward the strategic plan of “accelerating the formation of a new development pattern featuring domestic circulation as the main body and mutually reinforcing the dual circulations of domestic and international economy”. What is the connotation of domestic circulation, and how to measure it? What is the development trend of the dual circulations of domestic and international economy? How do the dual circulations of domestic and international economy affect each other, and what are the problems? How should we further build a new development pattern? All these problems are worth considering.This paper clarifies the connotation and boundary of domestic circulation and international circulation from the theoretical level, constructs the measurement method of dual circulations by using the input-output model, and thus constructs the theoretical analysis framework of dual circulations. In this way, we can study the current situation, characteristics, interaction and mechanism of China’s dual circulations.It comes to the following conclusions: Firstly, based on domestic supporting capacity and domestic market space, China’s economic development has shown a significant feature of domestic circulation and the overall level is higher than that of most emerging economies. Secondly, the general trade export relying on the domestic supply system is the main mode for China to participate in international circulation, followed by the processing trade mode of “both ends outside” and the general trade import mode using foreign supporting facilities. Thirdly, the entry of foreign-owned enterprises, especially cost-oriented foreign-owned enterprises greatly hinders the construction of domestic market network. Fourthly, the enhancement of domestic circulation, especially domestic supporting capacity, has significantly promoted general trade exports with a higher value-added level, which is conducive to the transformation and upgrading of China’s open economy.The conclusions of this paper provide important enlightenment for China to accelerate the construction of a new development pattern.In short, this paper mainly expands the existing research from the following aspects: Firstly, the input-output method is used to construct the theoretical analysis framework of dual circulations, which provides a normative analysis method for the study of dual circulations. Secondly, using the data of national input-output to make a quantitative analysis of the development situation and characteristics of dual circulations of major countries, especially China, is helpful to deeply analyze the current situation and prominent problems of China’s dual circulations. Thirdly, the policy suggestions based on normative research and analysis conclusions have certain practical significance for accelerating the construction of new development pattern.