HONG KONG ¨C China¡¯s growth model is undergoing fundamental change.
After decades of relying primarily on external demand to drive growth, the government has embraced a ¡°dual circulation¡± model, driven by both internal and external demand. The goal is to make China¡¯s economy more resilient and less vulnerable to external shocks, but the structural transformation has run up against major roadblocks.
When Deng Xiaoping launched his ¡°reform and opening up¡± in 1978, China pursued a development strategy modeled after successful East Asian economies like Japan and South Korea: welcome foreign direct investment; expand cross-border trade linkages; leverage low labor costs to bolster the manufacturing sector; and take advantage of external demand to drive growth. Over the last four decades, FDI flows ¡ª ¡ª enabled China to transform Guangdong and other coastal provinces into global supply-chain hubs.
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