Since the 1970s it has tried to develop semiconductors. But in fact the Chinese government’s record in promoting specific industries is patchy. Export powerhouses such as South Korea and Germany feel most exposed (see chart). “The WTO is not designed to deal effectively with a huge economy that has, as the core of its development strategy, industrial policies across a wide range of sectors.” Frustrations at the WTO’s inadequacy in restraining China have led the American government to look at other mechanisms (see article).įoreign competitors see China as a well-oiled machine and worry that they will lose business not just in China but around the world. “China learned how to game the system,” says Tim Stratford, a former American trade official responsible for dealings with China. Since 2011 America has formally requested information about more than 400 unreported Chinese subsidies. Similarly, foreigners have long complained that China hides much of its illegal state aid. But in the Chinese system the line between government-backed industry estimates and official guidelines is easily blurred. So the government can claim that these are simply industry reports, not official targets. But China’s market-share targets are primarily contained in semi-official documents, such as a blueprint published by the Chinese Academy of Engineering. The World Trade Organisation (WTO) strictly limits local-content rules. The targets also illustrate one of the facets of Chinese industrial policy that has so angered foreign companies and governments: the disguising of state support. “Clearly, this is no mere domestic exercise,” the EU Chamber of Commerce in China warned in a report this year. One plan features hundreds of market-share targets, both at home and abroad. Most contentiously, the government has laid out local-content targets for the various “Made in China” sectors (see chart). In August the Ministry of Industry and Information Technology unveiled a manufacturing-subsidy programme, spread across as many as 62 separate initiatives. By the start of this year, officials had established 1,013 “state-guided funds”, endowed with 5.3trn yuan ($807bn), much of it for “Made in China” industries. The “Made in China” plan, its latest industrial-policy craze, is derived in part from Germany’s “Industry 4.0” model, which focuses on creating a helpful environment through training and policy support but leaves business decisions to companies. The result is a wide-ranging approach in which the government tries to shape outcomes in important parts of the economy, new and old. The various plans overlap cars, for example, have appeared in every iteration. And two years ago it announced its “Made in China 2025” scheme, specifying ten sectors, including aerospace, new materials and agricultural equipment, which are now at the heart of its planning. In 2010 seven new strategic industries, from alternative energy to biotechnology, also became targets. ![]() For years the government concentrated on modernising what it classified as nine traditional industries such as shipbuilding, steelmaking and petrochemical production. What differs is the stress they lay on such measures.Ĭhina is unique in the breadth and heft of its industrial policy. Yet most countries try to support some industries, usually through a mixture of infrastructure, tax breaks and research funding. Governments, after all, have a lousy record in picking winners in fast-evolving markets. In America and Britain, faith tends to be supplanted by deep doubts. In continental Europe and, especially, Asia, many have faith in the government’s ability to steer companies into industries they might otherwise shun. China is rolling out a new generation of industrial policies, directed at a range of advanced sectors, raising worries that it will dominate everything from robotics to artificial intelligence. Yet there have also been big industrial-policy misses, notably the failure to develop strong car manufacturers and semiconductor-makers. It inspires awe of what it can accomplish and fear that other countries stand little chance against such a formidable competitor. High-speed rail is a prime example of the Chinese government’s prowess at identifying priority industries and deploying money and policy tools to nurture them. The state provided funds for research, land for tracks, aid for loss-making railways, subsidies for equipment-makers and, most controversially, incentives for foreign companies to share commercial secrets. China could not have built this without a strong government. China’s first high-speed trains started rolling only a decade ago today the country has 20,000km of high-speed track, more than the rest of the world combined. ![]() This was a triumph of industrial policy as much as of engineering. IN RECENT days China set the record for the world’s fastest long-distance bullet train, which hurtled between Beijing and Shanghai at 350kph (217mph).
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