When China first turned toward global markets, it had the advantage of virtually unlimited supplies of low-cost labour. But, as everyone recognises by now, China’s manufacturing prowess is not the result of unfettered market forces.
Western media are now replete with accounts of China’s “drive to dominate important cogs in the global industrial machine”, in the words of theagain. Increasingly, China’s role in the world economy is portrayed in terms reminiscent not of “doux commerce” but of imperial aggression. Chinese President Xi Jinping’s growing authoritarianism and the escalating trade conflicts with the US obviously play into this narrative..
But aren’t Chinese industrial policies, such as those deployed in medical supplies, unfair to competitors elsewhere? By the same logic, if Chinese policymakers effectively targeted activities where social benefits exceed private benefits, producing improved economic performance, then it is not clear why foreigners should complain.
The economics of industrial policy can get more complicated in the presence of monopolies and market-dominant firms. Industrial policies can be justifiably restricted when they enable the exercise of market power at the expense of the rest of the world.
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