Abstract：China’s new development paradigm features dual circulation, in which both domestic market and overseas one reinforces each other, with the domestic one as the mainstay. This is an important economic development path and strategy for China in the new stage of development. This paper focuses on the characteristics of China’s domestic great circulation from the perspective of China’s domestic unified large market construction. The building of a national unified big market involves six areas, namely, “unified basic market institutions and rules, high standard connected market facilities, unified factor and resource markets, unified commodity and service markets, unified market supervision and fairness, and regulation of improper market competition and market intervention”. These unifications involved in these fields were previously limited to small areas and were public goods in small scope. The essence of the construction of the domestic unified market is to break down the regional barriers and eliminate the administrative economy through top-level design, so that the regional public goods can be transformed into the generalized national public goods. The domestic circulation has two functions: improving transaction efficiency and production efficiency. This paper focuses on the following question: what impacts will these two functions have on China’s internal and external circulation?
In this paper, the new development paradigm, especially the two functions is viewed from the perspective of the division of labor. The two functions of dual circulation are analyzed endogenously within the framework of ultra-marginal analysis. A series of boundary conditions must be satisfied for the dual circulation structure to be the optimal structure among many structures of divisions of labor. This paper draws the following conclusions:
First, any kind of division of labor structure has its critical conditions to be satisfied. There is no optimal division of labor structure in every case. For a certain division of labor structure to become the socially optimal division of labor structure, its absolute transaction efficiency needs to have an overwhelming advantage over the compound absolute transaction efficiency under other structures, or its relative transaction efficiency advantage exceeds the relative productivity gap with other structures.
Second, traditional internal circulation can optimize the allocation of labor factors, reconstruct the inter-regional industrial division of labor, and increase per capita income. When domestic regions open to each other, domestic commodity market integration and labor market integration will emerge. Each product achieves domestic survival of the fittest according to the productivity level. In accordance with comparative advantages, each region divides its labor in production and trades at the highest productivity level. Micro entities increase their income by choosing high-productivity industries that suit them.
Third, with the domestic market as the mainstay, the construction of a national unified large market has obvious effect on promoting economic development of high-quality. The role of domestic large circulation is to improve transaction efficiency and production efficiency, increase income, and promote the transformation of employment structure and industrial structure. As a high-level division of labor structure, the domestic great cycle is the result of the microcosmic subject weighing the cost and benefit of the domestic great cycle. In the process of building a unified domestic market, the government is supposed to make intensive use of the limited tax revenue so as to provide better public services. Only in this way can we improve the transaction efficiency and production efficiency, promote the optimization of the social division of labor structure, and realize the jump from the traditional internal circulation to the high level of internal circulation.
Fourth, the action of the external circulation should be grouped into normal and abnormal situations. The function of normal external circulation is to optimize the allocation of domestic labor factors and reduce the technological gap with developed countries. The function of abnormal external circulation is also manifested as a forcing internal system reform, so as to make up for the loss of external trade distortion through the dividend of reform.
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Zhang Ribo. The Mechanism of New Development Pattern in Promoting High-quality Economic Development: From the Perspective of Infra-marginal Analysis. JOURNAL OF ZHEJIANG UNIVERSITY, 0, (): 1-.
