Escalated tensions between the United States and China have led to economic decoupling, especially in technology sectors like artificial intelligence, semiconductors, and 5G. The United States believes China has stolen some of its advanced technology, further motivating decoupling. These actions have complicated China’s future development plans, which rely on acquiring advanced technology to help build new domestic infrastructure. In response, China has implemented a “dual circulation” strategy in which its domestic market fosters economic growth and links to the international market. “Dual circulation” intends to maintain China’s state-run capitalist system while also rebalancing its internal and external markets.
One challenge to China’s plan is increasing domestic consumption and leaning less on investment, which fostered the country’s past growth. Developing a new industrial supply chain serves to insulate China from US decoupling, promote the “dual circulation” strategy, and decrease the US-China trade imbalance. However, the Chinese government’s plans may further exacerbate the decoupling process. Countries like South Korea, which relies on the heavy interdependence between the US and China, will find it harder to balance the two countries as they continue to diverge.
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