Chinese Central Bank Calls for Greater Support for Dual Circulation Policy, More Active Government Management of the Economy


A senior official from the Chinese central bank has flagged greater support from the financial sector for China’s “dual circulation (双循环) economic policy, while also flagging a more active role for the government in the management of the economy.

Liu Guiping (刘桂平), deputy-governor of the People’s Bank of China (PBOC) said that the Chinese financial sector must play a greater role in “further expanding the breadth and depth of dual circulation” at a press conference held on 15 January.

Liu said that at present domestic circulation needs to focus in particular upon four key problems.

  1. The strong momentum of export growth will be difficult to sustain, while consumption growth is lacklustre, and investment continues to decline. “There is considerable pressure on efforts to maintain the ongoing healthy development of the economy,” said Liu.
  2. The problem of “chokepoints” in key areas has become more pronounced, and tech innovation capability urgently awaits increase.
  3. Pressure on micro, small and medium-sized enterprises is increasing. “Maintaining the vitality of market actors faces challenges,” said Liu.
  4. The development of rural villages remains a key area of shortcoming. According to Liu “the path for comprehensively driving the revival of rural villages remains long and hard.”

With regard to international circulation, Liu highlighted continued uncertainties including:

  1. A rebound in the global COVID-19 pandemic.
  2. Turnaround in the monetary policy of major economies.
  3. Adjustments to global industry supply chains.
  4. Anti-globalist and populist sentiment.

With regard to providing further support to China’s dual circulations policy, Liu pointed to six measures in particular:

  1. Fully displaying an attitude of openness, and more active integration with the global economy. “Financial authorities must effectively implement financial opening measures in an orderly manner, steadily drive interest rate and exchange rate marketisation reforms, and firmly drive the interconnection of financial infrastructure,” said Liu. Liu also pointed to the need for expanding Belt and Road cooperation, continually improving financial regulatory system reforms, firmly guarding the “bottomline” against systemic financial risk, and striving to create a financial system which “is adapted to the new development conditions of dual circulation.”
  2. Fully exploiting the potential of China’s “large market capacity”, and overall planning for the “grand chapter of domestic demand driving economic growth.” “We must organically integrate expansions in domestic demand with deepening of supply-side reform of finance, and employ an innovative mindset and spirit when making arrangements in relation to end consumption and effective investment, targeting China’s current consumption conditions and the trend of change in the structure of consumption,” said Liu. “We must effectively employ the dual role of monetary policy tools in terms of total quantity and structure, clear out market policy transmission mechanisms, and provide an effective supply of funds for economic growth, driving the establishment of a system of financial products and services that provide greater benefit to growth in household incomes and upgrades to consumption, supporting increases in the willingness of households to consume, and strengthening ongoing consumption capability.”
  3. Fully employing the role of market actors such as micro and small-enterprises and individual industrial and commercial registrants, and continuing to consolidate the foundations for stabilising growth and protecting employment. “We must fully and effectively employ the driving role of market-based monetary policy tools, deeply implement upgrades to micro-and-small enterprise finance capability, and continue to resolve the difficulties of micro-and-small enterprises in seeking financing, to set firm foundations for the ongoing, healthy growth of the national economy.”
  4. Fully employing the advantages of a new national system, and driving tech innovation with full vigour. “We must form a positive cycle of ‘tech-drivers – modern finance – the real economy’ as soon as possible,” said Liu.
  5. Fully recognising the unique status of rural village development in the dual circulation policy, and advancing China’s rural village revitalisation strategy.
  6. Fully stimulating the potential of active government regulation, and more effectively driving the integration of fiscal, financial, industry and employment policy into a combined force. “The long-term accumulation of macro-economic control and adjustment experience has made the image of the Chinese government as an ‘active government’ increasingly pronounced internationally,” said Liu. “Under current conditions, we must vigorously raise the effectiveness of government administration, create an effective combination of fiscal, financial, industrial and employment policy, effectively engage in cross-cyclical macro-policy design and counter-cynical adjustments, and strengthen predictive management.”