II. The Same Old Wine in New Bottles "Dual circulation" represents no meaningful change.

• Author: Scissors, Derek

Chi Lo is right that Chinese policy matters to the world, in particular financial markets. He's at least partly right in characterizing this policy, especially the use of markets as tools. But "dual circulation" does not represent any meaningful change. It's merely Xi Jinping's latest stamp on a direction he set in 2013, which itself was only a moderate shift of direction after liberalization ended the previous decade. China will continue to distort competition in what it considers strategic sectors, borrowing to do so, and continue to coerce technology transfer. American policy has meant little to these choices to date and likely will again mean little in 2021.

Economic policy can be suspiciously wordy. Economic analysis, thankfully, is still mostly supply and demand. Beijing likes production and is suspicious of (true) consumption--dual circulation preserves this. "Domestic demand" has been trumpeted since 2007. Thirteen years later, as China claims to be recovering from Covid fastest of any large economy, its goods trade surplus is large and growing. Chinese production is outpacing the world, while its consumption lags. Again. Chi points specifically to dual circulation as rerouting $250 billion spent overseas by tourists. While this may hurt small foreign economies, it is just a drop to add to inadequate 2019 domestic consumption of $5.3 trillion.

On the supply side, this autumn's call for breaking industrial monopolies repeats one made soon after Xi took office in 2013. Actions since have featured repeated mergers of very large state-owned enterprises exactly to create quasi-monopolies, for instance China Ocean Shipping with China Shipping. More are in process now.

Chi correctly sees dual circulation succeeding the previous "supply side reform" and also affecting the global economy.

However, Beijing has called for curbs in sectors such as steel since the 2003 explosion in fixed investment. And Chi's claim that China has persisted in efforts to cut capacity, especially in steel and cement, runs afoul of the data. In 2019, China's share of global steel production rose to 53 percent, and share of global cement production rose to 57 percent. Stir in increases in aluminum at 56 percent and coal at 47 percent. Supply-side reform was either a miserable failure or, more likely, intended to concentrate output rather than reduce it at all.

Nor is dual circulation much of a change with regard to technology. As Chi says, China will continue to use...