In Xi's own words: What's "dual circulation?" Why it's New Development Stage?
Internal speech to senior Party cadres now in public view
求是 Qiushi, the flagship journal of the Communist Party of China Central Committee, published in its latest issue the full speech (CHN) by General Secretary Xi Jinping to a class for major leading cadres at the provincial and ministerial levels on January 11.
Based on the readout, Pekingnology on Feb. 26 published a lengthy piece called The "Spirit" of the 5th Plenum, explaining in great detail what are the 新发展阶段 new development stage, 新发展理念 new development philosophy, and 新发展格局 new development paradigm now dominating China’s official speak.
Bloomberg News, in writing about Pekingnology in March, referred to it as among the "fuzzier elements of Chinese politics like the ‘Spirit of the Fifth Plenum.’”
That Feb. 26 newsletter explained why you should pay attention. On top of that, also consider this: it was given exclusively to the class of major leading cadres at the provincial and ministerial levels - deputy ministers or provincial governors weren’t even present. Wouldn’t you want to be in that room?
So that is the aim of today’s newsletter, which will NOT repeat the points already made by the Feb. 26 newsletter, but focuses on the newly unveiled parts of the speech.
Please note neither that newsletter nor this one is a full translation. As always, usual disclaimers apply - the content here is neither official nor authoritative, as this is just a personal newsletter.
What’s the New Development Stage?
In the practice of applying the basic principles of Marxism to solve China's practical problems, our Party gradually realized that the development of socialism is not only a long-term historical process, but also a process that needs to be divided into different historical stages. from late 1959 to early 1960, Comrade Mao Zedong, while reading the Political Economy: A Textbook issued by the Economics Institute of the Academy of Sciences of the U.S.S.R (ENG), proposed that "the stage of socialism, in turn, may be divided into two stages, the first being undeveloped socialism and the second being more developed socialism. The latter stage may take longer than the former one." In 1987, Comrade Deng Xiaoping said, "Socialism itself is the primary stage of communism, and we in China are in the primary stage of socialism, that is, the underdeveloped stage. Everything has to be planned from this reality and according to this reality." The New Development Stage we are in today is one of the primary stages of socialism and at the same time one upon decades of accumulation and a new starting point.
Notes: That the development of human society can and shall be divided into different 阶段 stages is a feature of Marxist teachings.
Our country’s economic strength, scientific and technological strength, comprehensive national power, and people's living standards have jumped to a new great level, becoming the world's second-largest economy, the largest industrial country, the largest trading country of goods, and the country with the largest foreign exchange reserves, a gross domestic product of over 100 trillion yuan, a per capita GDP of over 10,000 US dollars, an urbanization rate of over 60% and a middle-income group of over 400 million people. In particular, great historical achievements have been made in building a moderately prosperous society in all aspects, and historic achievements have been made in solving the problem of absolute poverty that has plagued the Chinese nation for thousands of years. This is a milestone in the process of socialist modernization in China
We have clearly defined the roadmap and timetable for future development. This is, by 2035, with three five-year planning periods, the basic realization of socialist modernization. Then, in three more five-year planning periods, by the middle of this century, we will build a strong, strong, democratic, civilized, harmonious, and beautiful modernized socialist country.
The world today is experiencing the greatest change unseen in a century. In recent times, the world has been mostly characterized by one word - 乱/luan (chaos), and this trend looks set to continue. The response to the pandemic of COVID-19 has been a test to the leadership and institutional excellence of countries, and the results - which are good, which are bad - are obvious. Time and momentum are on our side, and this is where our determination and confidence lie.
1) The world was summarized to be chaotic and judged to remain chaotic for quite some time. Note the speech was made on January 11, shortly before the transfer of power in Washington.
2) Time and momentum are on our side conveys a sense of confidence. Your Pekingnologist recalls that Bloomberg News ran a story on this quote at the time.
At the same time, we must see soberly that, in the current and future period, although China's development is still in an important strategic opportunity period, the opportunities and challenges are developing and changing, and the opportunities and challenges are both unprecedented - overall, the opportunities outweigh the challenges. There is an old saying "cautious dealing with easy things can avoid danger, careful handling of small things can keep big disasters away. The entire Party must continue to be modest and prudent, work hard, mobilize all the positive factors that can be mobilized, unite all the forces that can be united, spare no effort to take care of our own business to achieve our established goals in perseverance.
Despite now being routinely portrayed as arrogant (Bloomberg Opinion, Hal Brands), China internally preaches modesty and prudence.
mobilize all the positive factors that can be mobilized, unite all the forces that can be united has for years been used by the CPC to suggest that the Party and the country should make friends wherever and whenever they can, instead of creating unnecessary foes or troubles.
spare no effort to take care of our own business appears to be putting domestic issues at the top priority whatever changes internationally.
Our task is to comprehensively build a socialist modern state, and of course the modernization we build must be with Chinese characteristics and in line with Chinese reality. I particularly emphasized five points at the Fifth Plenary Session of the 19th Party Central Committee, that is, our modernization is a modernization with a huge population size, a modernization with common prosperity for all people, a modernization with coordination between material and spiritual civilization, a modernization with harmony between human beings and nature, a modernization of the peaceful development path. This is the direction that our modernization must adhere to, to be reflected in our development policies, strategies and tactics, policy initiatives, and deployment of work.
Notes: Xi repeated - again, this is January 11, 2021 - five points that he said he had made in the Fifth Plenary Session of the 19th Party Central Committee, which is mid-October 2020. That includes 走和平发展道路的现代化 a modernization of the peaceful development path.
The people are the deepest foundation and greatest strength of our Party's governance. To seek happiness for the people and rejuvenation for the nation is not only the starting and ultimate goal of our Party's leadership in modernization, but also the "root" and "soul" of the new development concept. Only by adhering to the people-centered development thought and insisting that development is for the people, development relies on the people, and the fruits of development are shared by the people, will we have a correct concept of development and modernization. The Soviet Union was the first socialist country in the world and achieved glorious achievements, but later failed and disintegrated. One of the important reasons was that the Communist Party of the Soviet Union was detached from the people and became a privileged bureaucratic group that only defended its own interests. Even in countries that have modernized, if the governing party turns its back on the people, it will damage the achievements of modernization.
NOTES: One of the important reasons was that the Communist Party of the Soviet Union was detached from the people and became a privileged bureaucratic group that only defended its own interests. This perhaps explains, at least partly, Xi’s unyielding push to crackdown on corruption.
Achieving common prosperity is not only an economic issue, but also a major political issue related to the Party's governing basis. We must not allow the gap between the rich and the poor to grow wider, the poor getting poorer and the rich getting richer, and an insurmountable gap between the rich and the poor must not appear. Of course, to achieve common prosperity, we must take into account the needs and possibilities, in accordance with the laws of economic and social development in a gradual manner. At the same time, this work can not wait, we must consciously and actively solve the problems of regional disparities, urban-rural disparities, income disparities, etc., to promote overall social progress and comprehensive human development, promote social justice, so that the fruits of development more and more equitable benefit all the people, and constantly enhance the people's sense of realization, happiness and security, so that the people really feel that common prosperity is not just a slogan, but a visible, touchable, real and perceptible fact.
Xi vows We must not allow the gap between the rich and the poor to grow wider, the poor getting poorer and the rich getting richer, and an insurmountable gap between the rich and the poor must not appear.
Xi went on to list a number of problems and priorities
For example, scientific and technological self-reliance and self-improvement has become the basic capability that determines the survival and development of China, there are many “chokepoint” problems. For example, China's urban and rural regional development gap is large, and on how to solve this problem, there are many new issues need to be studied in-depth, especially the segmentation and restructuring of various regions, the speeding up of people’s migration across regions, the decreased willingness of farmers to settle in the cities - which shall be studied urgently and solutions proposed. For example, a high degree of consensus has been formed to accelerate the promotion of comprehensive green transformation of economic and social development, while our country's energy system is highly dependent on fossil energy sources such as coal, the system of production and living are under great pressure to transform to a green, low-carbon nature; to achieve the goal of carbon emissions peaking by 2030, carbon neutrality by 2060 is extremely difficult. For example, with the counter-current of economic globalization and an increasingly complex and volatile external environment, everyone must properly manage the relationship between self-reliance and openness and cooperation, manage the relationship between active participation in the international division of labor and safeguarding national security, manage the relationship between the use of foreign investment and security review, and expand openness under the premise of ensuring security.
We must adhere to the organic unity of political security, people's security, and the supremacy of national interests, and we must both dare to struggle and be good at struggling, and strengthen ourselves comprehensively, especially to enhance the strength of deterrence. On the macroeconomic front, we should prevent big ups and downs, prevent foreign capital from entering and leaving the capital market rapidly on a massive scale, ensure the security of supply in food, energy, and important resources, ensure the stability and security of the supply chain and the industrial chain, prevent the disorderly expansion and wild growth of capital, and also ensure the security of the ecological environment and resolutely grasp the safety of production. In the social field, it is necessary to prevent the risk of large-scale unemployment, strengthen public health security, and effectively resolve various types of mass incidents. We should strengthen the institutional construction of national security, draw on the experience of other countries, study how to set up the necessary "glass doors", add different locks at different stages, and effectively deal with various issues related to national security.
The following paragraphs elaborate on his thoughts on the “dual circulation” strategy. There have been numerous characterizations of it in both Chinese and foreign explanations and analysis (Google the term if you need to), but this should be considered the most authoritative, not least since it is his brainchild.
In recent years, economic globalization has encountered counter-currents and the pattern of international economic cycles has undergone deep adjustments. The Covid-19 pandemic has also exacerbated the trend of counter-globalization, and the tendency of domestic concerns has risen in various countries. During the Covid-19 pandemic, I visited several provinces to conduct research and study, to gain an in-depth understanding of the anti-pandemic situation and to investigate the problems arising from the resumption of work and production. During my visit to Zhejiang, I found that a local break in the global supply chain and industrial chain occurred under the impact of the pandemic, which directly affected our domestic economic circulation. Foreign raw materials can not come in, overseas personnel can not come, and goods can not go out - all needed by many local companies, which had to stop work and production. I felt that the situation was now very different, the conditions for "da jin da chu" have changed, and new ideas to lead the development must be proposed according to the new situation. Therefore, in April last year, I proposed to establish a new development paradigm with a large domestic circulation as the mainstay, and the domestic international dual circulation to reinforce each other. The Fifth Plenary Session of the 19th CPC Central Committee made comprehensive arrangements for building the new development paradigm. This is a strategic layout and first move to grasp the initiative of the future development, and is a major historical task that needs to be promoted to completion in the new development stage, as well as a major initiative to implement the new development concept.
大进大出 "da jin da chu" is the second part of a two-part 提法 set phrase: 两头在外，大进大出 “putting both ends of the production process on the world (the sourcing of raw materials and the marketing of products), large-scale imports and exports.” It’s basically a term that originated in the 1980s describing China’s export-led strategy and the country’s making of the world’s factory. And Xi believes that’s no longer feasible - giving rise to the “dual circulation.”
As a socialist country with a large population and a large market, China is bound to stand various pressures and severe challenges that no other country has encountered in the historical process of modernization. A quote from Comrade Mao Zedong in 1936 is instructive to us today. He said, "No matter how complex, serious, and miserable the environment, the first thing the military commander needs is to organize and use his own forces independently and autonomously. It is common to be forced by the enemy into a passive position, and it is important to recover the active position quickly. Failure to regain such a position is a failure. The active position is not imaginary, but concrete and material." We can only be based on ourselves - smoothing the great domestic circulation and striving to refine our body to withstand a hundred poisons - in order to withstand the changes in international storms and survive and develop always full of vitality. No one can beat us, choke us! Accelerate the building of a new development paradigm is to enhance our capabilities in survival, competitiveness, development and sustainability in a variety of foreseeable and unforeseeable storms and shocking waves; and to ensure that the great rejuvenation of the Chinese nation process not be delayed or even interrupted.
In practice, we should pay attention and prevent some misunderstandings: first, only the first half of the sentence, one-sided emphasis on "the main domestic cycle", advocating a substantial contraction in the opening up of the outside world.
Second, only the second half of the sentence, one-sided emphasis on "domestic and international dual circulation", disregarding the changes of International situation and patterns, clinging to the old idea of "liang tou zai wai, da jin da chu."
Third, each region focuses narrowly on its own jurisdiction and region and does not care about building a unified national market or smoothing the domestic circulation - only considers building the region's own small market and engaging in their own small circulation.
Fourth, thinking that smoothing the domestic circulation is only is to open up logistics and engaging in low-level logistical circulation.
Fifth, whenever talking about solving the "chokepoint" problems, do everything all by themselves and engage in redundant projects; focus blindly on "high-level" projects, regardless of reality and industrial base, leading to messy, abandoned projects.
Six, when talking about expanding domestic demand and the formation of a large domestic market, engage in blind lending to expand investment, over-stimulation of consumption, and even to engage in high energy consumption, high-emissions projects.
Seven, not paying attention to the supply-side structural reform but focusing only on demand-side management, thus unable to form a higher-level dynamic balance of supply and demand.
Eight, thinking that all these only concern the economic and scientific sectors and having little to do with their own govt departments, and so on. These perceptions are all one-sided or even wrong, and must be prevented and corrected.
1) Xi made clear what is NOT the “dual circulation” that he proposed, notably pushing back against
在对外开放上进行大幅度收缩 substantial contraction in the opening up of the outside world
2) Xi also warned against
solving the "chokepoint" problems, do everything all by themselves and engage in redundant projects; focus blindly on "high-level" projects, regardless of reality and industrial base, leading to messy, abandoned projects.
The sentence could be read as a warning to the effect that yes indigenous innovation is very important but that’s not an excuse for every city or province to have its own semiconductor fabrication plants.
Not exactly sure if he was referring to any specific case, but the Wuhan chipmaking fiasco (NPR) immediately comes to the mind of your Pekingnologist.
3) Since high energy consumption, high-emissions projects are mentioned here, please note according to a readout via Xinhua (CHN), Xi said in a Politburo group study session on April 30 that
The high energy consumption and high emission projects that do not meet (relevant) requirements must be resolutely taken down.
It’s quite safe to predict projects that can be characterized as such would meet significant regulatory challenges, if not outright mission impossible.
In today's world, the most scarce resource is the market. Market resources is our country’s great advantage, we must make full use of and give full play to this advantage, and constantly consolidate and enhance this advantage to form a strong support for building a new development paradigm. Expanding domestic demand is not a momentary measure to cope with financial risks and external shocks, nor is it about flooding the market with money, nor is it just about increasing government investment, but rather about establishing an effective system for expanding domestic demand, releasing domestic demand potential, accelerating the cultivation of a complete domestic demand system, strengthening demand-side management, expanding residential consumption, upgrading consumption levels, and making the construction of a mega domestic market a sustainable historical process.
To build a new development paradigm and implement a high level of openness to the outside world, we must have a strong domestic economic circulation system and a solid foundation, and use it to form a strong attraction to global factor resources, a strong competitiveness in fierce international competition, and a strong driving force in global resource allocation. We should continue to deepen the openness in the flow of factors such as goods, services, capital, talent and others, but also steadily expand the openness in institutional arrangements such as rules, regulations, management, standards and others…The interests of our companies have extended to all corners of the world, everyone should pay attention to understanding international affairs, deeply study countries that are stakeholders, trade partners, and investment targets, so as to have a clear picture and avoid harm.
Notes: Xi called on ministers and provincial leaders, many of whose portfolios apparently do not include external matters per se, to study international affairs.
As I said before, the most essential feature of building a new development paradigm is to achieve a high level of self-reliance and self-improvement. At present, our country’s economic development environment has changed, especially the relative advantages of production factors have changed. The cost of labor is gradually rising, the capacity of resources and environment has reached a bottleneck, the old formula for production functions has become unsustainable, and the importance of science and technology has risen across the board. Under such circumstances, we must put more emphasis on indigenous innovation. Therefore, in the "14th Five-Year Plan", the first major initiative is science and technology innovation, and the second is to break through the industrial bottleneck. We must understand this issue on the height of survival and development, comprehensively strengthen the deployment of science and technology innovation, and mobilize superior resources
NOTES: This is interesting because for a long time, especially since the Trump administration pushed aggressive China policy, the prevailing narrative on Beijing’s emphasis on solving “chokepoint” problems has been that Beijing is largely REACTING, which in the opinion of your Pekingnologist is certainly true.
But that also tends to obscure another, perhaps more fundamental explanation - Beijing believes with the rise of labor cost, the pressure from environmental degradation, the competition from other low-cost economies, and everything else, scientific and technology is now the only viable way for China to climb the ladder, with or without the Entity List at the U.S. Department of Commerce and other restrictions.
Whether the Spirit of the Fifth Plenary Session of the 19th CPC Central Committee can be implemented well concerns the next five years, 15 years and even a longer period of the development of the Party and the country. The Proposal of the Central Committee of the Communist Party of China on Drawing Up the 14th Five-Year Plan for National Economic and Social Development and Long-Range Objectives for 2030 adopted by the Plenary session is very rich in content, with macro-thought, guiding principles, strategic ideas, and specific requirements. It includes both the Party's consistent strategic deployment since the 18th National Congress, and new major judgments and new strategic initiatives. Without some serious effort, it is not easy to learn. If not well-learnt, the implementation of the spirit of the plenary session will miss the point. Leading cadres at all levels, especially senior cadres, should study the original text article by article and comprehend it paragraph by paragraph.
Time for a call back to the beginning of this newsletter: these “fuzzier elements of Chinese politics” are important stuff, which is why Pekingnology has spilled a lot of ink on this. You’re welcome to re-read the Feb. 26 newsletter The "Spirit" of the 5th Plenum.
For English speakers, the Center for Security and Emerging Technology (CSET) at Georgetown’s Walsh School of Foreign Service in December 2020 produced a translation of the Proposal that Xi asked leading cadres at all levels, especially senior cadres, to study article by article. The think tank that became a powerhouse for China researches in recent years and most recently sent Tarun Chhabra to the White House National Security Council apparently understood the importance.
Thanks for your time.