- End of last week, China approved its “Dual Circulation Strategy” which is the new five-year plan from 2021 to 2025.
- The plan intends a shift in the basic growth engine from exports to domestic demand. It also intends to further tackle the high credit-to-GDP ratio. Moreover, in the long run demographics will become a headwind.
- For private consumption this implies to lower the still high savings rate, increase urbanisation and to improve human capital.
- For investments, there is the need to raise productivity and to ”clean-up” the past misallocation of credit. A focus will lie on technological advances which will be supported by infrastructure modernisation.
- Finally, China does not want to close its doors but ”learn” from abroad which warrants a further opening up of the corporate sector and financial markets amid a strengthening of property rights.