The global resurgence of industrial policy is increasingly framed as a necessary response to the ‘China Shock 2.0’. As global supply chains fragment and the green transition accelerates, policymakers in both developed and developing economies are turning to state intervention to secure strategic industries.
Yet in their efforts to either replicate or counteract Beijing’s techno-economic statecraft, governments around the world risk formulating policy based on an incomplete understanding of how the Chinese model actually functions.
Alicia García-Herrero argues in this week’s lead article that the most critical lesson to draw from China’s industrial policy is an epistemic one. Policymakers’ understanding of the Chinese model is often askew, with ‘policy responses … often driven by what is most visible — subsidies directed at cutting-edge sectors like electric vehicles (EVs), semiconductors and green hydrogen. But this is only the tip of the iceberg’, García-Herrero writes. Beneath these targeted successes lies a substantial fiscal burden — state support to mature, inefficient sectors, largely channelled via state-owned enterprises.
Understanding this dynamic requires looking beyond the simplistic view of what is too loosely called ‘state capitalism’.
