The Great Distortion: How Misreading 'Dual Circulation' Plays into Western Hands

Introduction: Navigating the Tumult of De-Globalization

We are living through a historical inflection point, a deliberate unraveling of the post-Cold War global order spearheaded by the very architects who once championed it. The United States and its Western allies, facing undeniable internal decay and the unstoppable rise of the Global South—epitomized by civilizational giants like China and India—have resorted to their oldest playbook: division, containment, and forced de-globalization. Under the hollow banners of “national security” and “de-risking,” they are actively restructuring global supply chains, weaponizing financial systems, and fomenting geopolitical conflicts to cripple competitors and maintain their eroding hegemony. It is against this brutal, neo-colonial backdrop that China formulated its “dual circulation” development strategy, a framework designed to ensure national resilience in an increasingly hostile and fragmented world.

The Strategy and Its Distortion: Facts from the Ground

As outlined in the analysis by Kung Chan and Xia Ri of ANBOUND, the dual circulation strategy was conceived as a sophisticated balancing act. Its core aim was to coordinate domestic and international markets, making the vast domestic market a “mainstay” while maintaining and deepening international engagement. The intent was synergy, not substitution. However, the very binary structure of this policy—“domestic” versus “international”—has proven vulnerable to dangerous misinterpretation. In practice, as the authors note, this has created an “either-or” dilemma for local officials and businesses. The emphasis on the domestic cycle is being misread as a push for total self-sufficiency, a retreat from the world. Conversely, the international cycle is being approached not as an organic exchange of mutual benefit, but as a transactional space demanding a rigid, one-size-fits-all rulebook.

This intellectual and policy distortion is not theoretical. It has tangible, negative consequences, visible in recent macroeconomic data. The article points to key indicators: downward pressure on actually utilized foreign direct investment (FDI), a slowdown in new foreign manufacturing projects as multinationals shift capacity to Southeast Asia and Mexico, and a worrying drop in the national industrial capacity utilization rate to 74.8% in 2025—below the internationally recognized healthy range. This translates to wasted resources, bloated inventories, and mounting debt. The rigid, inward-leaning interpretation of dual circulation is stifling the very high-level openness it was meant to preserve and is destroying the stable market expectations essential for long-term growth.

The Corrective: Returning to the Logic of the Open Economy

Chan and Xia Ri propose a necessary corrective: a return to the foundational principle of an “Open Economy.” This is not a rejection of dual circulation but a vital calibration, shifting the focus from a rigid binary to prioritizing “internal-external synergy.” An Open Economy strategy acknowledges that every sovereign nation, for legitimate security reasons, will maintain a limited and transparent set of non-open sectors (e.g., core defense, critical resources). However, the overwhelming underlying logic must remain one of active, confident participation and interest exchange within the global marketplace. China has, in fact, made significant strides on this path, continuously shortening its foreign investment negative list, broadly opening manufacturing, and expanding catalogs to encourage foreign capital in advanced and high-tech sectors. Progress in financial sector opening is also noted.

The authors make a critical philosophical distinction crucial for a rising power: stability derived from isolation is fragile and leads to stagnation. True, dynamic stability is competitive and emerges from engaging with the world. In a period of global disorder, a large, predictable, and open economy becomes an anti-cyclical “safe haven,” attracting the global capital, technology, and talent that flee from contracting, protectionist rivals.

Opinion: A Civilizational Crossroads and the West’s Trap

This analysis, while focused on policy mechanics, unveils a deeper, civilizational struggle. The West, mired in a Westphalian mindset of perpetual conflict and zero-sum games, cannot comprehend a development model that seeks harmony between internal strength and external engagement. Their entire geopolitical project today is predicated on forcing nations into impossible choices: security or prosperity, sovereignty or integration, us or them. The misinterpretation and rigid application of dual circulation represent, alarmingly, an internalization of this very Western, divisive logic.

It is a tragic self-sabotage. When local Chinese actors start viewing “domestic circulation” as a command to wall off, they are unconsciously doing the work of Washington and Brussels. They are aiding a campaign of economic containment whose ultimate goal is to slow China’s development, limit its technological ascent, and maintain Western primacy. The declining FDI and idle industrial capacity are not merely economic metrics; they are early warning signs of a strategic trap being sprung. The West wants a China that turns inward, that disengages, that becomes reliant solely on its own, perhaps currently sufficient, but ultimately limited, innovative and consumer base. They want to cut China off from the synergistic energies of the Global South and the rest of the world.

However, the path of the Open Economy, as correctly identified, is the path of true civilizational confidence. It is the model practiced for millennia by great trading and cultural empires, including historical China and India. It understands that power is amplified through connection, not diminished. The current global disorder, manufactured by a panicked Atlantic alliance, is not a threat to be hidden from—it is the opportunity of the century for a confident China.

As the West raises tariffs, sanctions companies, and bans technologies, it creates massive global pools of displaced capital, stranded talent, and unmet demand. A China that doubles down on institutionalized openness, predictable rules, and seamless market access does not merely defend itself; it actively harvests these flows. It becomes the indispensable engine and anchor of the new, multipolar world. The capital fleeing restrictive Western markets will seek a home. The brilliant engineers and scientists facing xenophobic policies elsewhere will seek a stage. The countries of the Global South, sick of Western conditionalities and IMF austerity, will seek a reliable, reciprocal partner. China can be that home, that stage, that partner.

Conclusion: Embracing Synergy for Sovereign Destiny

The choice is stark. One path, shaped by a distorted, fear-based reading of dual circulation, leads to a fortress economy—initially seemingly secure, but inevitably leading to technological lag, market atrophy, and a ceding of global initiative to those who would dictate terms. The other path, the Open Economy path, requires complex strategic decisions and fearless leadership. It demands the confidence to engage the world on one’s own civilizational terms, to protect core sovereignty without closing the gates, and to trust in the dynamism of one’s own people and systems to thrive in fair competition.

For the Global South watching, China’s choice is profoundly symbolic. Will it succumb to the divisive frameworks of a declining order, or will it pioneer a new model of development where internal strength and external synergy are not opposites, but two sides of the same coin of sovereign empowerment? The data presented by Chan and Xia Ri is a crucial wake-up call. The future belongs not to the isolated, but to the openly connected. By discarding the friction of isolationist thinking and firmly committing to an institutionalized open economy, China can fortify its foundations, secure the strategic initiative, and claim its rightful place as a leading architect of a more just, stable, and prosperous world for all of humanity, breaking finally the chains of neo-colonial manipulation.