Chinese local governments are also competing fiercely for business – a crucial factor in enabling private businesses to thrive.
This reflects the rivalry between the powerful local secretaries of the Chinese Communist Party, many of whom eventually become members of the CCP Politburo. In contrast, central government ministers who run industrial policy and state-owned enterprises almost never make it to the upper echelons of the party.
EMULATING THE WORST ASPECTS OF CHINA’S INDUSTRIAL POLICY
If the United States forces China to dismantle its support for state-owned enterprises and roll back its industrial policy, it will only succeed in removing the shackles of the private sector, making it more likely that other innovative private companies, backed by Local party secretaries would emerge to challenge American business.
Although American consumers would benefit, these Chinese companies – whatever their intentions – have no choice but to comply when asked to advance the political goals of the CCP.
But the US strategy seems rather focused on emulating the worst aspects of Chinese industrial policy. One example is the Facilitating American-Built Semiconductors Act, recently introduced in Congress, which would grant investment tax credits to American chipmakers.
This follows the approval by the US Senate in June of a US $ 52 billion investment in the sector under US innovation and competition law.