Household consumption in China has crept up from about 34% of GDP in 2010 to roughly 39% in 2023. That slow shift is what an analysis circulated on LinkedIn points to as proof that Beijing’s “Dual Circulation” plan is doing something real.
China unveiled the strategy in 2020. The analysis rejects the idea that it amounts to isolationism or a retreat from globalization, and describes it instead as a reordering of priorities, with domestic strength at the center and engagement with the world on China’s terms.
The two loops
The name describes two engines. Internal circulation covers domestic production, distribution, innovation and spending. External circulation keeps China in global trade and investment, but in a more selective, high-value way.
On the home side, the aim is to unlock the buying power of 1.4 billion people. Higher minimum wages, wider healthcare and pension coverage and rural revitalization are meant to cut the precautionary saving that holds households back. China is also growing services such as healthcare, education, tourism and digital offerings.
Technology is the other pillar. China’s R&D spending passed USD 500 billion in 2022, second only to the United States, against a target of about 2.5% of GDP by 2025. Semiconductors, AI, advanced materials, biotech, EVs, aerospace and robotics head the priority list.
Abroad, China is spreading its bets. It is deepening ties through RCEP, the Belt and Road Initiative and South-South trade. ASEAN is now its largest trading partner. It still courts foreign investment in high-tech manufacturing and consumer sectors, while its own outbound money is aimed more tightly at critical resources, logistics, energy security and strategic technologies.
Why now
The analysis gives three pressures. Trade wars, export controls and the weaponizing of supply chains exposed Chinese vulnerabilities. The country also has to escape the middle-income trap, where growth depends on productivity and domestic demand instead of cheap labor. And a consumption-led model fits greener industries and relies less on debt-fuelled investment.
Chips as the test case
The semiconductor push shows the mechanism best. The National Integrated Circuit Fund has mobilized more than USD 50 billion, and firms such as SMIC and Hua Hong get tax incentives and subsidized loans. Domestic buyers, among them Huawei, Xiaomi, Alibaba and government procurement, guarantee a market, which lets makers climb the learning curve faster.
Under export controls, local suppliers now account for over 35% of semiconductor equipment revenue inside China. The country’s share of global wafer-fab capacity rose to about 18% in 2023 from under 10% in 2018. China still lags at the leading edge (below 7 nm, EUV lithography), but it has pulled ahead in mature 28 to 65 nm chips used in cars, power electronics and industrial systems.
The digital yuan
The e-CNY is the financial side of the same plan. It is a direct liability of the People’s Bank of China, so stimulus payments, subsidies and tax rebates can go to people without intermediaries. Offline-capable wallets reach rural and underbanked areas, and more than 225 million wallets had been opened by September 2023. During Singles’ Day 2023, e-CNY made up an estimated 10% of transactions in pilot provinces. Cumulative transactions stand at about 7 trillion e-CNY, roughly USD 986 billion.
Anonymized payment data also lets policymakers see spending patterns in near real time and tailor stimulus by region, something the analysis says cash and private platforms cannot do.
