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China 2021: Things to Watch in the "Year of the Ox"

Year of the Ox © Dirk Müller

2020 was a turbulent year for China and global economies due to the COVID-19 pandemic. The question now: What's in store for China in 2021 and what does this mean for global economics and international relations? Here are 4 topics to watch closely in the „Year of the Ox".

 

The 14th Five-Year Plan

This month China's annual National People's Congress parliamentary session will take place to approve the country's social and economic development plans for the period 2021- 25.
While every Five-Year plan is important and representative of its time, the 14th Five-Year Plan is particularly significant due to a convergence of many factors and the backdrop of the pandemic as it is seen as:

  • China's „Post-Covid" roadmap to advancing in the "New Normal"
  • Scientific & technological development and industrial reform against increasing geopolitical tensions
  • China's profile in a more and more complex international environment and its critical role in global              supply chains

 

Dual Circulation Strategy (DCS)

The 14th Five-Year Plan takes on the idea of "Dual Circulation" as its core concept for future economic growth, where China seeks to urge domestic demand on one hand and at the same time develop conditions to ease foreign investment and boost production for exports on the other. While on its distinction, the "DCS" is not a domestic-looking strategy only, however, some analysts assume that signaling an inward focus, by reducing exposures to the whims of the global economic landscape, the "DCS" may harm foreign companies on the Chinese market.

Decoupling

Due to the continued frictions with the US, the phenomenon of „Decoupling" also raises major concerns among European companies. Forced separation of US' and China's technology ecosystems, may EU-companies get caught between two opposing forces: China's bolstered campaign for technological self-reliance on the one hand, and America's necessity to keep up dominance in and control («national security issue») of particular strategic high-tech sectors, on the other hand.

Vaccination & Travel Restrictions

Domestically, the rollout of the China vaccination program has been relatively slow so far, provoking concerns that restrictions on international travel will remain until at least 2022. A survey by the German Chamber of Commerce (AHK) in China shows those travel restrictions remain the biggest challenge for German companies doing business in China in 2021. Somehow China's vaccination program has been a victim of its success of strict and rapid containment procedures that brought the number of cases down while reducing the incentive to get vaccinated.

A challenging „Year of the Ox" lies ahead.

Dirk Müller
VBU Partner Shanghai

(Photo by D. Müller)

 

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