Economic performance of China during the COVID-19 pandemic:
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In 2020 during the peak of the COVID-19 pandemic, when most economies were struggling, China was able to sustain its impressive economic performance.
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China’s gross domestic product grew by 2.2% in 2020 from the previous year. China’s manufacturing output registered an increase from the previous year and stood at a staggering $3.854 trillion. This growth in industrial production aided China’s economy to grow by 8.1% in 2021.
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Most macroeconomic indicators including important ones like investment levels, retail sales registered improvements.
China’s continued dominance in the manufacturing sector:
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There were predictions that the rising geopolitical tensions and trade wars along with the major learnings of the COVID-19 pandemic bringing to light the dangers of dependency on other countries for goods and services would result in factories moving out of China into newer locations.
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This prediction of ‘de-factorisation of China’ has not materialized. Notably, China accounts for about 30% of global manufacturing (equal to that of the United States, Japan and Germany put together). Also, China remains the world’s biggest exporter, accounting for 13% of world exports and 18% of world market capitalization in 2020-21.
China’s strategy in the manufacturing sector:
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Idea of ‘dual circulation’:
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China’s strategy for its domestic manufacturing sector is based on two types of circulation – internal and external circulation.
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The internal circulation would include the domestic cycle of production, distribution and consumption while external circulation would include the manufacturing for exclusive exports to other economies. Notably, the two circuits are expected to complement each other.
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China would place more importance on ‘internal circulation’ and this would constitute its major route for economic growth and development. ‘External circulation’ would only play a supplemental role.
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The main theme of this strategy is that China would continue its emphasis on industrialisation and cut its dependence on global trade and markets.
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Advanced Manufacturing:
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China is pushing industrialisation towards ‘advanced manufacturing’ and higher levels of automation and digitization, and increased adoption of artificial intelligence (AI). The increased role of robots and AI in manufacturing is slowly spreading to design, delivery and even marketing.
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This gives Chinese manufacturing predominance in growing high tech sectors that are less exposed to lower-cost competition. These high-tech production sectors provide for increased reliability and product quality along with cost-efficiency.
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There seems to be a focussed approach to establishing Chinese dominance in the AI sector. Notably, China leads in the number of AI research publications.
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Other measures being taken:
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Recognizing the criticality of a skilled labour force in economic development, China has placed high emphasis on skilling its labour force.
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China has been able to ensure continued and sustainable supply of strategic raw materials to its domestic industries by increasing domestic production as well as acquiring mines in other resource-rich countries.
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