Internal circulation, external circulation, difficult internal and external circulation

After the U.S.-China confrontation, the Chinese Communist Party (CCP) saw that the external situation was not good, and at one point, the CCP only advocated internal circulation. The fact that the strategy has been changed again and again shows that the Chinese Communist Party is facing the current internal and external situation in a state of uncertainty.

In fact, to say “internal and external double-cycle” is to say nothing; which country’s economy is not built on the basis of internal and external double-cycles, and which country can only do internal or external double-cycles? No matter how you put it, the double cycle of internal and external circulation is an inherently hard law of the century. The internal cycle ensures people’s production and livelihood needs, while the external cycle is a big business of import and export, and a source of foreign exchange for the country, both of which cannot be dispensed with in a single day.

Unprecedented downturn in domestic and external demand

To go back to the double circle, inside and outside, is to go back to the basic facts, no more and no less. The question is not which side is heavier and which side is lighter, the question is whether there are conditions for an organic and effective cycle.

The internal cycle depends on internal demand, the external cycle depends on external demand, there is demand for a cycle, no demand for a cycle, demand for a good cycle, demand for a small cycle is difficult.

There are two main reasons for the current downturn in external demand, one temporary and one structural.

The pandemic has brought the society to a standstill, with repeated and serious epidemics in Western countries, and the ban on clustering leaving the consumer market in a semi-dead state, with people’s income drastically reduced, spending out of budget, and counting on government relief like a long drought. Recently, Pfizer announced the successful development of a vaccine, but experts estimate that other countries will have to wait until the second half of next year, except for the United States. It seems that the short-term impact is inevitable, while the long-term impact is God knows.

The structural impact is the outward migration of the industrial chain. In order to avoid dependence on China, the United States and western countries have transferred the production chain of raw materials and key components to small and medium-sized countries in Southeast Asia and America. Large-scale out-migration of enterprises is a structural change, future imports from Europe and the United States, will largely come from different countries, rather than selling a taste from China. This is not an overnight change, and it is difficult to reverse, and will certainly deal a heavy blow to China’s foreign trade.

In addition, China’s Belt and Road, in addition to geopolitical conspiracy, also has the intention of capacity transfer. Domestic overcapacity, through the Belt and Road infrastructure projects to absorb part of the excess capacity, but the Belt and Road have been blocked one after another, the future is not optimistic, so this part can not be pinned on high hopes.

As for domestic demand, it is also at an all-time low. China’s economy has passed its peak and is on a downward spiral. The epidemic has hit the country, causing massive and prolonged social disruptions, lowering production and living standards, reducing people’s incomes and naturally stifling demand.

Over the years, the adverse effects of over-investment gradually appeared, high-speed rail has been nearly saturated, the real estate market is in jeopardy, the decline in external demand has led to order depletion factory shutdown, the rise in unemployment. People who bought properties and cars earlier are facing the dilemma of having to repay the principal and interest, if they are unemployed and find it difficult to find a job, it will be even worse.

Tighter control of social suffocation

Under the oppressive internal and external environment, the Chinese Communist Party has tightened its political control over a society that is in crisis and insecure, and even the cultural life of the people has been subjected to numerous hurdles, resulting in a suffocating society. The government’s move to promote the private sector and the people’s retreat have undermined the vitality of private enterprises, the cadres and the masses are struggling to cope with political studies, and the government’s demand for economy and mobilization for war have all dealt a heavy blow to the people’s consumption desire. The government spends a lot of public money on maintaining stability and spending on national defense is bound to rise sharply, resulting in tighter control over production, investment and people’s livelihoods.

Last year, there were frequent natural disasters and social accidents, and the grain harvest was the lowest ever. People are no longer as optimistic about the future as they used to be, and they are holding on to their wallets, not daring to spend money lavishly, which has also dealt a severe blow to the market sentiment.

The deterioration of U.S.-China relations over the past year, public protests in Hong Kong, Taiwan’s rising international status, and increased external pressures have made both the government and the private sector worried about the future. The Chinese Communist Party has been forced to make war preparations to deal with the crisis in the Taiwan and South China seas. The environment is hostile, with the top brass at their wits’ end, policies wavering from side to side, and the grassroots at their wits’ end. Officials at all levels are spending a lot of time on politics and stability, struggling to raise money to survive, while the people are scared and uncertain about the future. On the one hand, nationalism has risen, and on the other, people’s hearts are yearning for change, creating a strange atmosphere in society.

No matter what the current social situation is, internal and external cycles exist and are still in progress, the only difference is whether they are good or bad. The only difference is whether the cycle is good or not. At the moment, the situation is not good, and the longer it drags on, the harder it is to get back. In the light of the above, the question remains: where is the way forward?