China
Gaining Valuable Insights from China’s Industrial Policy
The resurgence of industrial policy, driven by responses to the ‘China Shock 2.0’, risks misjudging China’s complex model, often focusing on visible subsidies while neglecting its broader economic dynamics and historical context.
The Rise of Industrial Policy
The global resurgence of industrial policy is largely a reaction to what’s termed the ‘China Shock 2.0’. As supply chains become more fragmented and the green transition gains momentum, governments worldwide, both in developed and developing nations, are increasingly turning to state intervention to safeguard strategic industries.
Misinterpreting the Chinese Model
In their quest to emulate or counter China’s techno-economic strategies, policymakers often develop an incomplete understanding of the Chinese model. Alicia García-Herrero emphasizes that the main takeaway from China’s industrial policy should be epistemic. Many policy responses tend to focus on prominent subsidies in high-tech sectors like electric vehicles and semiconductors, overlooking the substantial fiscal burden stemming from state support for less efficient, mature sectors, often funneled through state-owned enterprises.
A Complex Economic Landscape
To grasp the full scope of China’s economic success, one must move past the simplistic label of ‘state capitalism’. China’s economic advancement stems from decades of catch-up growth, driven by a pragmatic culture and the Chinese Communist Party’s commitment to economic performance. This approach involves a careful balance between strong state intervention and allowing market forces to operate, highlighting the complexities behind China’s success.
Source : Learning the right lessons from China’s industrial policy
