Industry policy with Chinese characteristics:a multi-layered model

Though China has characteristics of a developmental state like those of East Asia, there are evident differences due to China’s scale. Unlike the East Asian model, in which the central government takes charge of industrial policy directly, the Chinese central government formulates the policy and the local governments implement it. Thus, a multi-layered and complex policy structure has been the norm, and considered one of the Chinese characteristics. This paper examines several examples of Chinese industry, and finds that the effectiveness of this model mainly depends upon the way the central and local governments interact. For example, the 2004 automotive industrial policy was successful, because the central-local interactions demonstrated mutual accountability and thus brought policy innovation. After 2004, however, the auto industrial policy became ineffective, when the environment and the central-local relationship changed. It remains to be seen whether relevant parties could improve their coordination to produce a better result.