The Strategic Choice of the New Development Pattern of"Double Cycle"in the Framework of Inframarginal Analysis:Based on the Analysis of the Sino-US Trade Friction
With the rapid economic development and the improvement of international status,China was positioned as a strategic competitor by the United States in 2017,and then a series of policy measures against China were proposed and applied by the US.government,the most important of which was the trade friction.The process of the rise of unilateralism and protectionism has been intensified by the arrival of the Covid-19.The trade structure between the US and China is being changed under the trade friction,which will improve the domestic circulation level of the Chinese economy,and will change the production-consumer utility of the two countries.In May 2020,the new development pattern of"double cycle"was proposed by China,combining China's domestic market advantages under many improvements in the domestic environment to cope with the changes unseen in a century in the international environment including the trde friction the US arose against China.These issues will be discussed in the theoretical model of this paper.Since the change of trade structure involves the problem of corner solution,inframarginal analysis method will be applied in the model of this article.A two-country trade model that contains two goods and divides the domestic and international markets with different transaction efficiency will be constructed.Based on the comparison of the production structure and production-consumer utility between China and the US before and after changes in parameters such as tariff,transaction efficiency,and production technology,the impact of the Sino-US trde friction and the response options of China′s"double cycle"new development pattern strategy will be revealed and explained.Based on the theoretical analysis,the digital parameters will be combined with computer simulation technology to simulate and verify the theoretical process.Theoretical and numerical simulation results show that:(i)The trde friction the US arose will lead to distortions in the trading conditions between the two countries,which will damage the export industries of the two countries and benefit the import industries in the short term;(ii)The long-term trade friction will harm the interests of the two countries and increase the distortion of the terms of trade,and the proportion of China′s domestic economy will increase;(iii)Improving trading conditions and upgrading the production technology will help build a"double cycle"development pattern,which allows China to stimulate the vitality of the domestic market and obtain new sources of economic growth.An explanation is provided for the path of the trade war′s impact on China′s economy and China′s"double cycle"new development pattern.It also provides a new theoretical framework for later research related to changes in the trade structure.
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