‘Made in China 2025’ is only following the path beaten by the US and its allies

Winston Mok says the US, Japan and Korea are among the many countries that industrialised successfully on the back of government support. So why does the prospect of a Chinese industrial policy provoke outrage?

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A worker puts the finishing touches to an iPal social robot, designed by AvatarMind, at an assembly plant in Suzhou, Jiangsu province, China, on July 4. Robotics is one of the focus areas under the Made in China 2025 plan. Photo: Reuters

Published: 2:02am, 12 Oct 2018Updated: 2:34pm, 12 Oct 2018

Why is Made in China 2025 so offensive to some US leaders? Few countries, the United States included, achieved successful economic development without some form of industrial policy. In the contemporary context, it is often associated with the East Asian model – which generated the most notable post-war economic successes.

From steel to shipbuilding, from automotive to consumer electronics, Japan and Korea would not have achieved strong positions in these industries without significant state coordination, protection and subsidies. After Japan, Korea, Taiwan and Singapore all adopted some form of industrial policies in their development processes.

So, why a different standard for China? Japan and Korea were US allies in the cold war, the Korean war and the Vietnam war. They received significant US aid and were under US tutelage. In contrast, China is perceived as a rising threat.

China did not adopt the East Asian model of industrial development. Instead of nurturing infant industries with a closed domestic market, China was more open to foreign investment from the start. Although the playing field is not level for some industries, the China market – where foreign brands are much more prominent – is more open than the Japanese market once was.

Lacking capital and the requisite institutions, China just did not have the resources to pursue effective industrial policies. Smarting from disastrous state “planning” in the decades before economic reforms, Beijing was less convinced of the wisdom of state intervention. Instead, it effectively leveraged overseas capital, initially from Hong Kong and Taiwan in particular – the latter which is obviously not beholden to Beijing’s will.