China wants to revitalize its domestic market again

China has announced that it will revitalize its domestic market again. In the past, there was attempt to stimulate their Chinese domestic market right after financial crisis of 2007-2009. It is famous that Chinese corporate have massive debts due to excessive investment to increase the employment rate and GDP.

To solve this issue, China has attempted to internationalize its currency RMB by pushing forward OBOR(One Belt One Road) which later changed its name to BRI(Belt and Road Initiative). The ambitious plan is for economic development and commercial project that focuses on improving connectivity and cooperation among multiple countries across the continent of Asia, Africa, and Europe.

Stimulating its domestic economy by its huge population (over 1.4 billion) can be very convincing, however, the weakness in its risky currency has made their plan failed temporarily.  Increase in FFR(Federal Fund Rate) announced by Federal Reserve has caused Chinese currency outflow.

Also, there is risk in two factors why Chinese have difficulty in revitalizing its domestic market at this moment.

1. China has a lot of corporate debt, so the companies may not be able to hire low-income groups, so overall income may not go up.
2. Unlike the United States, China has insufficient energy resource, so relying on imports would be unavoidable. (China needs U.S Dollars to import the commodities. In order to stabilized the Dollars, they have to export and earn the capital)

In addition, RMB is a risky asset, so there is a risk of outflow of local currency which might cause serious stagflation(most of emerging market faces this problem).

However, finding alternative energy would be the number 1 priority in order for China to grow stubborn. Movements to foster electric vehicle batteries in recent years is to activate the domestic economy, which will help achieving their ultimate goal, Smart City Project and Made in China 2025.

[News from WSJ]
https://www.wsj.com/articles/chinas-xi-pledges-stronger-domestic-market-global-ties-as-strife-with-west-brews-11595409718?fbclid=IwAR3ffVUWdzks9P5h_iIOwKVR6vtKO55IsMlX1JShN-o6Ewi-Ov0oLNlwhW4