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liferated rapidly during the period of study heavily on China as a source of revenue and
and received over half of all government those that relied heavily on China’s imports
subsidies (53.5%), a higher share than state- benefited somewhat from rapid growth in the
owned enterprises (37.7%) and foreign-owned upstream sectors fostered by China’s industrial
firms (8.8%). policies. In addition, while firms with limited
presence in China suffered significantly, some
Government subsidies may bolster China’s firms U.S. firms offset the negative effects by offshoring
in targeted industries at the expense of U.S. production capacity to China.
firms. Prior to the release of a FYP, U.S. industries
that were counterparts to those supported by The impact of the industrial policies embedded
the government in China exhibit growth trends in the FYPs shifted over time from lower-skilled
similar to unsubsidized industries in China. In industries to higher-skilled industries. Early FYPs
other words, the evidence suggests that U.S. (i.e., the 10th and 11th plans covering 2001 to
industries were not outcompeted by subsidized 2010) tended to displace production in labor-
Chinese firms prior to their being subsidized. intensive industries in the U.S. such as consumer
electronics, textiles, and furniture manufacturing.
However, in the years following a new FYP, However, the more recent FYPs (i.e., the 12th
researchers found that the number of China’s and 13th plans covering 2011 through 2020)
firms in targeted sectors surged by 15% squeezed higher capital-intensive industries like
compared to non-targeted sectors, while firms telecommunications and clean energy.
and total job postings at U.S. firms in the
corresponding sectors experienced a roughly China’s government support for industry
5% decrease. U.S. firms in these sectors also important in its race to lead. The analysis
experienced a decline in earnings and output. shows that China’s government support plays
a significant role in enhancing the competitive
The strength of the correlation held even when standing of China’s firms. Decisions by China’s
removing China’s fastest-growing firms from the government to elevate its global prowess in
analysis, suggesting that the changes were driven certain industries has led to the relative decline
by government targeting and subsidies rather of such industries in the U.S., not just in low-skill
than “natural” dynamism occurring irrespective “sunset” industries from which the U.S. may have
of government support. Researchers also found been happy to retreat, but also in higher-skill
that capital markets in the U.S. failed to predict industries that both countries are eager to lead.
any decline in fortunes for U.S. firms in sectors
later targeted by a FYP, further suggesting that
competition with China’s newly-subsidized firms
played a role in the observed decline at U.S. firms.
China’s industrial policy differentially affects U.S.
firms, industries. Certain U.S. firms and industries
were able to offset the negative impact of China’s
industrial policy. U.S. firms that depended
Number of firms in targeted sectors compared to non-targeted Outcomes for U.S. firms in targeted sectors compared to non-targeted
sectors around the release of a Five-Year Plan (FYP) in China sectors around the release of a Five-Year Plan (FYP) in China
SOUTH CHINA BUSINESS JOURNAL 24
and received over half of all government those that relied heavily on China’s imports
subsidies (53.5%), a higher share than state- benefited somewhat from rapid growth in the
owned enterprises (37.7%) and foreign-owned upstream sectors fostered by China’s industrial
firms (8.8%). policies. In addition, while firms with limited
presence in China suffered significantly, some
Government subsidies may bolster China’s firms U.S. firms offset the negative effects by offshoring
in targeted industries at the expense of U.S. production capacity to China.
firms. Prior to the release of a FYP, U.S. industries
that were counterparts to those supported by The impact of the industrial policies embedded
the government in China exhibit growth trends in the FYPs shifted over time from lower-skilled
similar to unsubsidized industries in China. In industries to higher-skilled industries. Early FYPs
other words, the evidence suggests that U.S. (i.e., the 10th and 11th plans covering 2001 to
industries were not outcompeted by subsidized 2010) tended to displace production in labor-
Chinese firms prior to their being subsidized. intensive industries in the U.S. such as consumer
electronics, textiles, and furniture manufacturing.
However, in the years following a new FYP, However, the more recent FYPs (i.e., the 12th
researchers found that the number of China’s and 13th plans covering 2011 through 2020)
firms in targeted sectors surged by 15% squeezed higher capital-intensive industries like
compared to non-targeted sectors, while firms telecommunications and clean energy.
and total job postings at U.S. firms in the
corresponding sectors experienced a roughly China’s government support for industry
5% decrease. U.S. firms in these sectors also important in its race to lead. The analysis
experienced a decline in earnings and output. shows that China’s government support plays
a significant role in enhancing the competitive
The strength of the correlation held even when standing of China’s firms. Decisions by China’s
removing China’s fastest-growing firms from the government to elevate its global prowess in
analysis, suggesting that the changes were driven certain industries has led to the relative decline
by government targeting and subsidies rather of such industries in the U.S., not just in low-skill
than “natural” dynamism occurring irrespective “sunset” industries from which the U.S. may have
of government support. Researchers also found been happy to retreat, but also in higher-skill
that capital markets in the U.S. failed to predict industries that both countries are eager to lead.
any decline in fortunes for U.S. firms in sectors
later targeted by a FYP, further suggesting that
competition with China’s newly-subsidized firms
played a role in the observed decline at U.S. firms.
China’s industrial policy differentially affects U.S.
firms, industries. Certain U.S. firms and industries
were able to offset the negative impact of China’s
industrial policy. U.S. firms that depended
Number of firms in targeted sectors compared to non-targeted Outcomes for U.S. firms in targeted sectors compared to non-targeted
sectors around the release of a Five-Year Plan (FYP) in China sectors around the release of a Five-Year Plan (FYP) in China
SOUTH CHINA BUSINESS JOURNAL 24
