BEIJING'S PAIN POINTS - 3 (The Change of Economic Model and Foreign Policy Risks)

ABSTRACT

The consequences of COVID-19, both inside and outside China, especially in the countries - major importers of Chinese products, have negatively impacted the Chinese economy. These negative socio-economic consequences forced Beijing to accelerate the transition to a relatively new economic development model, which was marked in the early 2000s. The main component of this model is the expansion of domestic consumption and, accordingly, a further increase of the contribution of this indicator to the Chinese GDP itself and of its growth rate. However, this does not mean that China will abandon economic expansion and the implementation of its foreign economic and initiatives. Their importance as structural parts of the new economic model will continue and even grow. The acceleration of the transition to the dominance of domestic consumption in economic development is additionally conditioned by the foreign policy deadlock in which China found itself at the end of 2020. Despite the world's fastest economic recovery from the COVID-19 pandemic, China has been unable to take advantage of this advantage effectively. Chinese "mask" diplomacy did not bring the desired results for Beijing - the PRC was not able to raise the leader's torch temporarily lost by the United States. On the contrary, under the influence of Western propaganda, the contradiction in the perception of China as "our own" in the market sphere and "an alien" in the sphere of ideology has intensified. At the same time, due to increased competition in high-tech markets, in particular, 5G communication technologies, the ideological "alienation" of China is beginning to be used by Western countries in market wars in their favor. The forecast of economic development both by international and Chinese experts assumes the growth rate of China's GDP in 2021 will be in the range of 6-8%. In our opinion, this is an overly optimistic estimate, and the corresponding figure will probably be 5-6%. The PRC is entering the 14th Five-Year Plan amid greater uncertainty the prospects for the recovery of the world economy as a whole and, in particular, of the main Chinese trading partners, are not clear;limited instability is possible due to the accelerated change in the model of economic development;the volume of Chinese GDP has reached more than 15 trillion USD, therefore, each percent of its growth has become significantly "heavier" and more difficult to achieve. At the same time, the primacy in economic recovery and the continued potential for the expansion of the Chinese middle class bring positive contribution to the economic prospects of the PRC.