Chinese President Xi Jinping said on Thursday that China is set to change its development model from next year, relying more on domestic consumption than export-reliant growth which propelled it to become the world’s second largest economy next only to the United States.
“From next year on, China will embark on new journey toward fully building a modern socialist country,” 67-year-old Xi said while addressing the Asia-Pacific Economic Cooperation (APEC) CEO Dialogues via video link.
“We will foster a new development paradigm with domestic circulation as the mainstay and domestic and international circulations reinforcing each other”, he said.
“The new development paradigm is a strategic decision we have made based on the current stage and conditions of development in China and with full consideration given to economic globalisation and changes in the external environment,” he said.
Last month, a key conclave of the ruling Communist Party of China (CPC) headed by Xi adopted his proposals for the formulation of the 14th Five-Year Plan (2021-2025) for National Economic and Social Development and the Long-Range Objectives Through the Year 2035.
While the 14th Five-Year plan envisages a massive overhaul of the country’s domestic market to boost consumption in order to reduce China’s reliance on shrinking exports markets, the Vision 2035 visualises a long-term plan, reflecting the development vision of Xi.
China’s status as a world’s factory has been affected by declining global markets and US President Donald Trump’s trade war as well his move to ban Chinese tech firms like Huawei, TikTok.
The US also recently clamped restrictions on exports to Semiconductor chips to China, deepening the technology conflict between world’s top two economies. China expects that hostility with the US would continue under President-elect Joe Bidden tenure as well though Chinese experts believe some buffering period.
Explaining the reasons for the paradigm shift in China’s development model, Xi in his address said the model of reliance on foreign markets and resources has gone through some gradual changes.
“The ratio of foreign trade to GDP dropped from 67 per cent in 2006 to less than 32 per cent in 2019, while the ratio of current account surplus to GDP has come down from 9.9 per cent in 2007 to less than one per cent today,” he said.
“In seven years since the 2008 global financial crisis, the contribution of China’s domestic demand to GDP exceeded 100 per cent, making domestic consumption the main driver of its growth,” he said.
China’s per capita GDP has topped USD 10,000 and its middle-income population has exceeded 400 million. It is projected by many international institutions that China’s retail market will reach USD six trillion in size this year, he said.
Xi said the new development paradigm will enable China to fully unlock its market potential and create greater demand for other countries.
“As China’s economy grows, our people naturally want to lead an even better life. This will create more demand for a greater variety of quality products, technologies and services from across the world,” he said.