SINCE the World Health Organization declared COVID-19 a pandemic in March, the deadly virus has spread to more than 200 countries. The human cost of the coronavirus has continued to mount, while gold prices surged, reaching a record US$2,031 per ounce after the release of views on economic prospects from the Federal Reserve and the TikTok event in early August.
Why the gold price keeps rising is actually a deep concern for the uncertainty about the globe’s effective control over the spread of the virus, the excessive liquidity injected into the global market and the worries about stagnation.
These worries or uncertainties are actually not only burdened by a new peak of the gold price, but also by the sudden braking of the world’s economy and human activities. What a pandemic can impact is actually more than direct economic output or numbers of casualties, especially in an era in which human societies have become accustomed to globalization.
Snce the end of World War II, especially the end of Cold War between the U.S. and former Soviet Union, the world has experienced and benefited from frequent international travel, trade and investment. This is for sure what globalization, which has benefited countries bilaterally, not unilaterally, really looks like. China has actually sacrificed a lot in many aspects in playing the role as the world’s major producer, while at the same time attaining reasonable economic gains.
The July meeting of the Political Bureau of the Communist Party of China Central Committee called for a quick formation of a new mode of development with the domestic circulation being the mainstay, and the domestic and international circulations complementing each other.
This new policy is based on a comprehensive consideration of the latest global economic and epidemic situations. As the largest emerging market and exporter around the globe, China used to activate economic growth by working as the world factory, first taking advantage of its ample labor resources and cheaper land cost, and then developing different industries and sub-industries to establish the most comprehensive industrial chain around the globe.
For China, massive government-financed rescue packages can no longer be the solution to the U.S. trade and technology provocations and the pandemic-induced recession in the global markets, especially at a time when capital prefers to turn to the gold market to avoid risk. With the largest consuming market and the most comprehensive industrial chain in the world, China has the ability to regain economic growth by invigorating the domestic economic circulation, even while being confronted with oversupply in the domestic market and lack of some critical imports. China is reallocating its resources to try to activate the demand from its domestic market. As a mainstay, the domestic circulation does need the international circulation as a complement, whose degree is certainly subject to the changes in international politics, economy and global pandemic containment.
Evn from the perspective of the nation’s strategic transformation, the domestic circulation is a must for China, as deepening reforms in scientific and technological systems will activate the potential of the Chinese economy by exploring and nourishing domestic demand, and trade tensions, and other conflicts between nations can create a new landscape for global supply chain management. For China, the domestic circulation does not represent a return to the closed-door era, but serves as a new mode of development and a new support to other countries’ economic development. Instead, China’s supply chains still provides a contribution to globalization and specialization even when world trade becomes more fragmented, for the international circulation plays as a complement.
China’s manufacturing sector saw the most vigorous recovery in more than nine years last month, when the General Manufacturing Purchasing Managers’ Index reached 53.1, a sign of the domestic market warming-up in spite of the global epidemic.
If social distancing must be accompanied by international economic distancing, the mode of domestic circulation is not the best option, but does become a new solution for China.
