(Reuters) – China will step up fiscal policy support for a strategy to make its economy mainly rely on domestic demand, supply chains and innovation, Finance Minister Liu Kun said.

China has unveiled a “dual circulation” strategy for the next phase of economic development in which it will rely mainly on “domestic circulation” – the internal cycle of production, distribution, and consumption, supported by innovation and upgrades in the economy.

“Fiscal policy has the advantage of optimising resource allocation and promoting structural adjustments” Liu said in an article republished on the finance ministry’s website dated Friday.

“Government finance is duty bound to support and speed up the cultivation of a complete domestic demand system, and there is much to be done,” Liu said.

Fiscal policy will also support China’s tech innovation and upgrading its supply chain, Liu said.

China has boasted the most complete manufacturing supply chains in the world, but tension with the United States has exposed China’s vulnerability as it relies heavily on U.S. high-tech products, such as semiconductors.

Liu also said China would strengthen its fiscal and tax support for sectors concerning national economic security and ensure the safety of sectors such as grain, energy, technology and health.

China will establish a mechanism for local government debt financing to strengthen the prevention of any hidden debt risk, Liu added.

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