China’s Modernization and Industrial Policy

After turning away from orthodox planned economy, China has pursued a rather pragmatic and experimental policy since the beginning of the reform and opening policy in the late 1970s, whose primary goal was quantitative growth. The private sector contributed significantly to this. Despite periodic crises, which each required a hard counter-steering, this policy led to impressive growth rates. After 2006, however, the focus shifted more toward an interventionist industrial policy. Initially, stimulus programs were at the forefront in the wake of the global financial crisis, but under President Xi Jinping the objectives changed. With massive investments and state support, China not only wants to catch up with the leading nations but also develop future industries and use them in the national interest. In the 14th Five-Year Plan, adopted in March 2021, China pursues its national goals under the keyword “dual circulation” and wants to make itself more independent from foreign countries. For an analysis of whether this policy can actually be successful, the author says, it is still too early.