‘Made in China 2025’ and The Recent Industrial Policy in China

Abstract

After a long period of high economic growth and industrialization, the Chinese economy has recently entered a period of relatively low economic growth. Behind the past remarkable performance lies the government’s ambitious and interventionist industrial policies. To ensure a swift transition and avoid falling into a middle-income trap, the Chinese government has recently devised a new industrial policy named ‘Made in China 2025.’ This strategy envisages that China will join the rank of industrialized countries through a structural change towards high-tech industries and by nurturing domestic production and absorption of ‘smart manufacturing’ technologies. This new strategy favours domestic firms against foreign competitors and imposes strict domestic content requirements. In the past, these were essential characteristics of traditional industrial policies not only in East Asia (such as in Japan, Korea, and Taiwan). But the scale of the Chinese economy ensures that such a policy will have a significant impact on the world economy. In this chapter, we overview and evaluate contemporary industrial policies in China in conjunction with criticism from some advanced countries, which recently led to trade frictions. We set up a theoretical and analytical framework to analyse industrial policies and apply it to the Chinese case.