Screenshot of the report by Project Syndicate
China’s industrial policies did not come at the expense of the rest of the world, and the US and Europe should not try to undercut China’s economic progress, according to an opinion piece published by Project Syndicate in July 9.
In the article, Dani Rodrik, Professor of International Political Economy at Harvard University’s John F. Kennedy School of Government, highlighted though Sino-US tensions are real, economics should not become hostage to geopolitics or reinforce and magnify the strategic rivalry.
The article illustrated China’s strength in the production of medical supplies. By the time the crisis erupted, China had become the world’s largest supplier of key products, accounting for half of all European and US imports of personal protective equipment.
“China has laid the groundwork to dominate the market for protective and medical supplies for years to come,” according to a recent report by the New York Times.
Noting the fact that the strategic and geopolitical tensions between the US and China are real, the author stressed that economics should not become “hostage to geopolitics or, worse, to reinforce and magnify the strategic rivalry.”
One-half of China’s economic miracle, it cited, reflects its turn to markets after the late 1970s, the other half is the result of active government policies that protected old economic structures while a wide array of industrial policies boosted new industries.
“[T]hese gains did not come at the expense of the rest of the world…The growth policies that today arouse other countries’ ire are the reason China has become such a large market for Western exporters and investors.”
In regards to some complaints that Chinese industrial policies are unfair to competitors elsewhere, the author suggested outsiders to exercise caution before reaching such a verdict.
Noting that Chinese policies are a case of “fixing market failures,” the author said, “[I]f 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 article cited an example of China’s policy on the renewable energy industry, saying Chinese subsidies for solar panels and wind turbines have produced a decline in the cost of renewable energy, which is “an enormous benefit for the rest of the world.”.
Other countries should not stand idly by while China progresses to ever more sophisticated industries, the author warned.
Meanwhile, the US and Europe are recommended to focus on building more productive, more inclusive economies at home, “not simply to outcompete China or try to undercut its economic progress.”