Dual Circulation: A Study in Junmin Ronghe

12 As such, major Western institutions understand this policy through a macroeconomic lens. This analysis serves a different purpose, as it believes such understandings and the present literature are incomplete on account of the potential dual circulation that plays as a geopolitical sword and shield, one which mirrors China's already established civil-military fusion. The present literature is not incorrect in its analysis of dual circulation in terms of macroeconomic function; however, it needs to be connected with the civil-military fusion to properly understand all angles it serves. The fundamental role this dual circulation carries can be observed in the 2020 Politburo Standing Committee meeting, wherein the statement regarding dual circulation's exigence is officially stated, "deepen supply-side structural reform, fully leverage our super-large market advantage and domestic demand potential, and build a new development pattern in which domestic and international circulations mutually promote each other."3

4 Xi's framework is set on indigenizing production capacity in strategic sectors, that is, strategic translation of the vague "supply-side structural reform"; what that means, however, is an orientation surpassing simple economic change.56 This framing is not, therefore, merely economic, but entwined with the state as a whole, not market efficiency. Structural reform of the internal supply capabilities of China's economy posits the notion that China's modern orientation is not merely economic reform but also plays a role in grand strategy. What serves the state is not market reform, but civil-military fusion; a weaponization within the markets and an insulation from foreign chokepoints. This insulation from international leverage is the emphasis on self-reliance in critical technologies; this is mirrored throughout the world in terms of both risk and strategy.7 The United States does not export the manufacturing of weaponry, for example; however, the outsourcing of microchips has led to great fear of losing that very technology or production ability, thus becoming technologically handicapped.7 It is these kinds of chokepoints China is working through the dual circulation to eliminate; the strategy is to prioritize assets, while removing liabilities.7,8 The technologies with such an emphasis for dual circulation are those of semiconductors, AI, and advanced manufacturing.7,8,99 This has been perceived as a macroeconomic strategy to replace imports to bolster domestic growth, it is instead a substitution serving to eliminate chokepoints the US demonstrated it could leverage through the Foreign Direct Product Rules (FDPRs) on Huawei, as well as sanctions and export controls.8 The modern United States prefers to utilize less violent, risky maneuvers such as wars, particularly in the age of nuclear powers, and instead depends on its economic arsenal; it is this underbelly that China is fortifying and thereby reducing American leverage.7,9 As Cheung writes, the techno-security state depends upon economic instruments for security ends.9

It is this leverage which is being removed, and, given American dependence upon Chinese mineral processing, potentially reversed. It was only the result of American credibility that American sanctions, FDPRs, and restrictions on trade did not lead to the perception of the United States as a reckless financial pilot of the world economy. As such, weaponization of the economy, foreign exchange system, banking systems, and supply chains did not derail the world economy or shift it elsewhere. This may occur, however, should China weaponize its own supply chains now. In the long term, this changes. Should China successfully insulate itself and remove these chokepoints, it would suffer no great harm by weaponizing its supply chain against the US, so long as it kept positive ties with other major trading nations.

The prominence of this insulation is reiterated by the 14th Five-Year Plan, which dedicated a full chapter to dual circulation with a primary focus on internal, rather than external, circulation.10 Self-reliance, therefore, is a significant objective, not simply an economic plan established to mitigate the financial pains of COVID. Building domestic consumption establishes more than state-controlled growth; instead, it reduces the economic leverage that trade dependency provides foreign adversaries. A China independent of the export markets is a China that cannot fall victim to financial coercion. In other words, it is deterrence economics. The external circulation component is perceived the same way China's joining the WTO was perceived; a commitment to globalization. However, controlling external engagement by selectively maintaining trade relationships while also promoting domestic redundancy is the same dual-use posture. China reaps the benefits of technology, capital, and market access from the international system while eliminating its own vulnerability to that system. This is not and cannot be perceived as an openness to the world but instead as what it is: strategic asymmetry, following the same playbook of the ascension to the WTO.

11 the military-civil fusion strategy, as well as Xi's consistent framing since 2014 of national security through economic security.12 The Belt and Road Initiative13 and Made in China 2025,11 before dual circulation, functioned at first as a policy buzzword, but when falling from Xi's mouth, solidifies into a broader strategic direction, which was implemented into action across the party apparatus. The pattern is echoed throughout, Beijing announces an economic initiative while Western analysts debate its economic merits, and its secondary purpose is a security architecture which goes glossed over for the economic considerations.

The implications of this Chinese policy and its enactments change Western policy implications correspondingly. If this policy of dual circulation is tied as closely to the military-economic doctrine as it seems to be, rather than an economic policy, evaluating it upon domestic economic success is faulty. Regardless of a boost in domestic consumption, and therefore "failed", dual circulation will still succeed in indigenizing semiconductor production as well as reducing financial exposure to US sanctions and FDPRs. As such, it can fail in economic theory but succeed in geopolitical stratagem. The original liberal belief of China's ascension to the WTO was that it would inspire more Western, liberal, democratic principles within China; instead, it simply enabled the nation to utilize international benefits without shifting. This would be another step in the same practice, economic shifts utilized to game the system. For US policymakers, such a reframing suggests a different response, a competitive response is not trade pressure but instead a parallel effort to understand and contest the chokepoints Beijing is attempting to seal. If American policy wishes to preserve leverage over China, it must orient itself around preserving leverage in the sectors China is sealing, or find new pressure points China has not yet become aware of.

Dual circulation is not an economic response to COVID, nor a reaction to trade war pressures imposed upon the West. The West had leverage through FDPRs, sanctions, and chokepoints it retained through its rein on the global economy; however, this leverage has atrophied greatly. The dual circulation policy implemented is not just reactionary; it is also preparatory for an insulated economy, untouchable to Western powers' intervention and restriction. America's economic power, utilized against Russia and Iran, has been revealed, the West has played its hand; China's response is to mitigate its influence from the inside. The evidence of Beijing's own texts suggests a deliberate doctrine redesigned to make China's strategic position less vulnerable to these powers of pressure that Washington has depended upon in the past two decades.

Notes & References