Is China’s state-led industrial policy on a perilous path? Some Beijing advisers warn of ‘detrimental’ implications
- Injecting funds into strategic industries such as alternative energy has given China a massive leg up on the international competition, but domestic experts say cracks may be showing
- The potential for a wave of trade protectionism against Chinese products is seen posing big risks to economic development and innovation
China’s surging exports in alternative energy and its widening trade surplus are fuelling debate not only overseas but also in its own backyard over whether Beijing should adjust its industrial policy that the US and Europe frequently criticise amid fraying ties.
The discussions of late reflect a deep division among Beijing’s policy advisers on the efficacy and consequences of the country’s economic growth model, which underpins much of its industrial policy.
Some of those advisers contend that China’s industrial policy works to its advantage amid intense competition with the US in advanced technologies. In the midst of weakened domestic demand post-pandemic, they see state-led investment as an effective path to steady growth.
However, others warn that Beijing’s broader trade relations with the West are at stake, and that the government needs to consider carefully the global impact of pumping massive funds into strategic sectors – some of which have already become awash with overcapacity.
We need to take situations like this seriously
Huang Yiping, a former adviser to China’s central bank and the dean of Peking University’s National School of Development, said a balance needs to be struck between expanding domestic consumption and increasing government investment.