China | Understanding China's new growth model

Summary

We analyze and clarify the market misperceptions on the "three pillars" of China's new growth model: common prosperity, self-sufficient technology under "dual circulation" strategy and carbon neutrality. We also identify winners and losers of the sectors under the new policy paradigm.

Key points

• Key points:
• Three “pillars” of China’s new growth model are not isolated from each other, by contrast, they are tightly correlated, coherently witnessing China’s economic transformation.
• "Common prosperity" is not equal to “robbing the rich to help the poor”, or nationalization of private enterprises. It is expected to be achieved through tax scheme reform instead of through abrupt regulatory reforms.
• Self-sufficient technology does not mean going back to the "closed-door" policy. It indicates China needs some Plan B in the 35 items of bottleneck tech to better prepare tech war with the US and supply chain decoupling.
• Carbon neutrality indicates China's business cycle will transform from previous real estate driven to green economy and new energy driven.
• The new growth model will create new winners and losers at the sector level. We identify regulatory headwinds for sectors associated with rising tensions of social inequality, environmental sustainability, and data security risks; while policy support to high-end manufacturing, technology advancement and new energy.

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