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The Determinants And Effectiveness Of Industrial Policy In China: A Study Based On Five-Year Plans

Author

Listed:
  • Yiyun Wu

    (Zhejiang University, China)

  • Xiwei Zhu

    (Zhejiang University, China)

  • Nicolaas Groenewold

    (Economics Programme, University of Western Australia)

Abstract

Industrial policy is ubiquitous in both developing and developed countries. In China, government intervention in favor of specific industries is believed to play an important role in economic development. The targeting of strategic industries for preferential treatment has been a central part of both national and provincial Five-Year Plans (FYPs). While arguments for and against industrial policy are well-known, empirical evidence regarding both the formulation and effects of such policy are scant. Our paper contributes to the literature by examining industrial policy in China over the period of four FYPs (the 9th to the 12th, running over the period 1996 to 2015). In particular, based on China’s national and provincial FYPs, this paper investigates the determinants and effectiveness of industrial policy at the four-digit manufacturing sector level. This paper finds that the central government’s preferences act as a key determinant of the provincial governments’ FYPs. High productivity does not improve an industry’s chance of selection by the provincial governments. We also show that preferential policy has a significant positive effect on industry output growth while the FYP is in effect but that there is no evidence of a beneficial effect beyond the end of the particular FYP.

Suggested Citation

  • Yiyun Wu & Xiwei Zhu & Nicolaas Groenewold, 2016. "The Determinants And Effectiveness Of Industrial Policy In China: A Study Based On Five-Year Plans," Economics Discussion / Working Papers 16-21, The University of Western Australia, Department of Economics.
    • Handle: RePEc:uwa:wpaper:16-21
    Note: MD5 = dd0026945b702e21c0e58c14464cb473
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    Citations

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    Cited by:

    1. Carsten A. Holz, 2020. "PRC Industrial Policies Postdate Rather Than Lead Economic Activity," CESifo Working Paper Series 8097, CESifo.

    More about this item

    Keywords

    Industrial Policy; Five-Year Plan; Industrial Development; Productivity;
    All these keywords.

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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