In the strategic game between China and the United States, the orientation of China's response policy can be seen from two aspects. One is to tilt more resources towards technological innovation and manufacturing power, striving to achieve technological self-reliance and self-improvement. The other is to strengthen cooperation with the Belt and Road countries to diversify export markets.
Trump's 2.0 phase of reciprocal tariff policy has taken the situation faced by countries around the world to a new height. Practice has shown that we can be confident in China's technological self-reliance and industrial competitiveness. In the face of Trump's unprecedented global economic experiment, achieving market independence should be elevated to the level of national independent development.
The main path of market independence is to expand domestic demand. Expanding domestic demand is not just a matter of financial resources, but also a matter of mindset and reform. At present, our institutional division of labor between the central and local governments is not conducive to the establishment of a domestic demand system. The local governments cannot directly benefit from redirecting their resources towards incentivizing residents' consumption, as it is difficult to be reflected in the local economic aggregate, finance and taxation, and even performance evaluation. This involves the issue of incentive compatibility under the existing system. Therefore, in order to expand domestic demand, the top-level design at the central level is particularly important, which requires more top-down reforms.
