China's techno-industrial policy under Xi Jinping has evolved into a more centralized, security-linked, and finance-driven system, prioritizing national security, technological self-reliance, and frontier leadership over growth. The Party-state utilizes five channels and 18 instruments to define priorities, mobilize resources, and discipline firms, achieving impressive gains in technological capabilities and supply chain resilience.
However, this system generates tensions, including centralization risks, cost-spreading mandates, and politicized investment. Fiscal constraints since 2021–2022 are shifting Beijing from direct spending to mandates like guidance funds and targeted credit, spreading costs across firms. The "investor state" faces structural limits, with local fund models exhibiting weaknesses. Party-state corporate control has deepened, steering private firms via regulation and state stakes. Externally, the Belt and Road Initiative projects Chinese technology and standards globally, creating structural friction as China's surplus manufacturing output invites international resistance through tariffs and trade remedies.
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