context: Some of the Sino-US trade war is focused on industrial policy, with US concern over China’s ambitious ‘Made in China 2025’ program. Despite Beijing downplaying the initiative, global mistrust plagues China’s ambitions for global leadership.
A key reason for supporting industrial policy is that it can improve efficiency, said Bai Chong’en 白重恩 Tsinghua University School of Economics and Management executive vice president in a keynote speech at the China Competition Policy Forum on 31 July 2018. A series of empirical analysis on Chinese and Japanese industrial policies reveal, however, that these policies don’t achieve the desired effect on total factor productivity. While policy measures to strengthen competition improve efficiency, policy measures which hinder competition are not conducive to achieving efficiency, reports Caixin.
Whether some countries will be passive or forced to adopt certain industrial policies in order to address some aspects of vulnerability is a question, Bai said at the end of his speech. In an interview with Caixin, he later revealed that this statement was a reflection of the ZTE incident, asserting that international technology governance needs to be addressed now. Although rules exist which are targeted at enterprises, they are powerless at the national level, stated Bai.
In the short and medium term, he argues there is limited room for discussion with the US given conflicting interests, but that Europe may be a potential negotiant given its vulnerability. In order to cooperate with the continent, Bai believes that China’s approach to industrial policy as well as its objectives have to be adjusted. Whereas Europe will almost certainly choose US over Chinese hegemony on the basis of ideology, Bai asserts that if China pursues industrial policy which is non-subjugated and pluralistic, then the EU and Japan will be sympathetic and seek alternative technology outside the US, thus allowing the potential for a united front.