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How Does China Conduct Industrial Policy: Analyzing Words Versus Deeds

Author

Listed:
  • Alicia García-Herrero

    (Hong Kong University of Science and Technology
    Bruegel)

  • Michal Krystyanczuk

    (Bruegel)

Abstract

This paper analyzes how China’s industrial policy works focusing on the setting of objectives (“words”) and their implementation (“deeds”). In particular, we investigate how objectives vary across central and local Five-Year Plans (FYPs), in terms of industry preferences, and also compare such objectives with those included in China’s landmark industrial policy, “Made in China 2025.” Notwithstanding China’s centralization of policy planning, we find relevant sectoral differences between central and provincial planning and key industrial policy documents. Secondly, we look at how decisions are made in the realm of China’s industrial policy (“deeds”). To this end, we assess empirically why certain companies are selected under the most recent grand industrial policy strategy, the 10,000 Little Giants, a spin-off of “Made in China 2025.” Out of the key four criteria of selection (i.e., “words”), one is missed in most cases, namely the concentration of the business activity in the relevant sector. Secondly, the intensity of R&D is only significant in the most recent batches of selected companies. For the last two (revenue generation and leverage), there is no noticeable difference between the selected companies and the others. Our results point to the complexities in conducting industrial policy in China as words and deeds do not necessarily align.

Suggested Citation

  • Alicia García-Herrero & Michal Krystyanczuk, 2024. "How Does China Conduct Industrial Policy: Analyzing Words Versus Deeds," Journal of Industry, Competition and Trade, Springer, vol. 24(1), pages 1-25, December.
    • Handle: RePEc:kap:jincot:v:24:y:2024:i:1:d:10.1007_s10842-024-00413-w
    DOI: 10.1007/s10842-024-00413-w
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    References listed on IDEAS

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    1. Loren Brandt & Johannes Van Biesebroeck & Luhang Wang & Yifan Zhang, 2017. "WTO Accession and Performance of Chinese Manufacturing Firms," American Economic Review, American Economic Association, vol. 107(9), pages 2784-2820, September.
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    More about this item

    Keywords

    Industrial policy; China; Large-language models (LLM);
    All these keywords.

    JEL classification:

    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods

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