The Decomposition of Dual Circulation and External Dependence of Economy

Abstract

Abstract: This study proposes a new decomposition framework of China’s economic dual circulation, divides external dependence of economy into different types (i.e., simple/complex; forward/backward), and analyzes the relationship between the external dependence of economy and the growth of economy. We find that the scale of internal circulation is greater than that of dual circulation, and simple dual circulation corresponds to the smallest volume. After reaching the peak in 2006, the external dependence of economy has decreased gradually, and the peak of backward external dependence appeared earlier. During the rapid economic growth period, the external dependence of economy is positively related to the growth of economy, and the relationship during the slow economic growth period is just the reverse. The decrease in foreign demand has a significant impact on the sectors with a greater degree of forward external dependence, so an effective solution is to stimulate internal demand. The findings of this study are supportive for China to anchor its economic growth at internal circulation and gain extra impetus from dual circulation.

Key words: internal circulation, dual circulation across domestic and international markets, external dependence, input-output model

Zhang Zengkai, Zhu Kunfu. The Decomposition of Dual Circulation and External Dependence of Economy[J]. Management Review, 2024, 36(2): 3-13.

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