The common perception of China relying on industrial policies to make its economy successful is just an illusion," says Fan He, assistant director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences. "If industrial policy works, it's mainly at the local level."
Industrial policy is sometimes shorthanded by its critics as "picking winners" -- essentially, it's government intervention to build certain industries by offering incentives and shielding them from foreign competition. Japan's industrial policy of the 1970s and 1980s, which was later copied by South Korea and Taiwan, is among the most studied recent examples. But if the goal of traditional industrial policy is to invest in companies and turn them into global dynamos, China has a long way to go. More than half of Chinese exports are made by companies with significant foreign investment. Although Lenovo and Haier have made laudable strides overseas, Beijing has yet to produce a truly international brand along the lines of Japan's Sony or Toyota. And it has struggled to consolidate its automotive, steel, aluminum, and coal-mining industries.
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