Hostname: page-component-586b7cd67f-r5fsc Total loading time: 0 Render date: 2024-11-24T00:38:42.411Z Has data issue: false hasContentIssue false
  • English
  • Français

China's Race to the Top: Regional and Global Implications of China's Industrial Policy

Published online by Cambridge University Press:  11 February 2021

Seung-Youn Oh
Seung-Youn Oh*
Affiliation:
Bryn Mawr College, Bryn Mawr, USA
*
Email: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

The paper examines the global and regional implications of China's revitalized state capitalism model through the sectoral lens of the Chinese automotive industry, which stands at the intersection of both traditional and green industrial policy. At the multinational level, China skillfully facilitates local policy implementation that creates excess capacity by propping up local and national champions through convenient compliance with the WTO. At the bilateral level, China closely links purchasing and coercive diplomacy with protections for Chinese players both at home and abroad. Key endeavors like the Belt and Road Initiative open up overseas markets to develop global champions and secure foreign footholds for Chinese champions. Additionally, China's increasing reliance on exclusionary diplomacy provides political justifications to discriminate against foreign competitors within the Chinese market while moving forward with industrial upgrading of domestic players. When linked together, these factors – all byproducts of China's approach to state-led capitalism – combine to explain China's efforts to create a race to the top.

Keywords

Chinaindustrial policyeconomic statecraftstate capitalismBelt and Road Initiativeindustrial upgradingnew energy vehicles
Type
Original Article
Information
World Trade Review , Volume 20 , Special Issue 2: Economic Statecraft and Global Trade in the 21st Century , May 2021 , pp. 169 - 185
Copyright
Copyright © The Author(s), 2021. Published by Cambridge University Press

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Aggarwal, V.K. and Reddie, A.W. (2020) ‘New Economic Statecraft: Industrial Policy in an Era of Strategic Competition’, Issues & Studies 56(2), 2040006.CrossRefGoogle Scholar
Axelrod, R. and Keohane, R. (1985) ‘Achieving Cooperation under Anarchy: Strategies and Institutions’, World Politics 38(1), 226–254.CrossRefGoogle Scholar
Baldwin, D.A. (1985) Economic Statecraft. Princeton, NJ: Princeton University Press.Google Scholar
Barrett, E. (2019) ‘Government Subsidies Fueled China's Electric Vehicle Boom. Now They're Facing Intense Scrutiny’, Fortune, 6 September 2019.Google Scholar
Bown, C.P. (2009) ‘US–China Trade Conflicts and the Future of the WTO’, Fletcher Forum of World Affairs 33(27), 27–48.Google Scholar
Bown, C.P. and Hillman, J.A. (2019) ‘WTO'ing a Resolution to the China Subsidy Problem’, Journal of International Economic Law 22(4), 557–578.CrossRefGoogle Scholar
Bradsher, K. (2012) ‘Trade Case May Produce Few Results’, The New York Times, 18 September 2012, page 1, sec. Business.Google Scholar
Bremmer, I. (2010) The End of the Free Market: Who Wins the War between States and Corporations? New York, NY: Portfolio.Google Scholar
Cheung, T.M., Mahnken, T., Seligsohn, D., Pollpeter, K., Anderson, E., and Yang, F. (2016) ‘Planning for Innovation: Understanding China's Plans for Technological, Energy, Industrial, and Defense Development’, Report prepared for the US–China Economic and Security Review Commission.Google Scholar
China Association of Automotive Manufacturing (2018) ‘Announcement of the Whitelist (First Batch) of the Automotive Traction Battery and Hydrogen Fuel Cell Industries’, www.caam.org.cn/chn/1/cate_3/con_5217381.html.Google Scholar
Crompton, P. (2016) China Bus Battery Subsidy Ban Causes Share Slump for Korean Suppliers. Energy Storing Publishing.Google Scholar
Dollar, D. (2019) ‘Understanding China's Belt and Road Infrastructure Projects in Africa’, Brookings (blog).Google Scholar
Drucker, P.F. (1946) Concept of the Corporation. New Brunswick, NJ: Transaction Publishers.Google Scholar
Economy, E. and Levi, M.A. (2014) By All Means Necessary: How China's Resource Quest Is Changing the World. Oxford and New York: Oxford University Press.Google Scholar
Espa, I. and Durán, G.M. (2018) ‘Renewable Energy Subsidies and WTO Law: Time to Rethink the Case for Reform Beyond Canada – Renewable Energy/Fit Program’, Journal of International Economic Law 21(3), 621–653.CrossRefGoogle Scholar
European Union (2020) General Overview of Active WTO Dispute Settlement Cases Involving the EU as Complainant or Defendant, of Cases under Bilateral Agreements and of Active Cases under the Trade Barriers Regulation.Google Scholar
Feng, A. (2019) ‘We Can't Tell If Chinese Firms Work for the Party’, Foreign Policy, 7 February 2019.Google Scholar
Gao, H.S. (2011) ‘China's Ascent in Global Trade Governance: From Rule Taker to Rule Shaker, and Maybe Rule Maker?’, in Deere-Birkbeck, C. (ed.), Making Global Trade Governance Work for Development. New York: Cambridge University Press, pp. 153–180.Google Scholar
General Ministry of Customs (2005) ‘Measures for the Administration of Import of Automobile Components and Parts Featuring Complete Vehicles’, http://pkulaw.cn/fulltext_form.aspx?Db=alftwotitle&Gid=12c483a12c85e40abdfb.Google Scholar
Gersdorf, T., Hertzke, P., Schaufuss, P., and Schenk, S. (2020) McKinsey Electric Vehicle Index: Electric Vehicle Trends. McKinsey.Google Scholar
Gerstel, D. (2018) ‘It's a (Debt) Trap! Managing China–IMF Cooperation Across the Belt and Road’, Center for Strategic and International Studies 16(October), 12–16.Google Scholar
Haley, U.C.V. (2012) ‘Putting the Pedal to the Metal: Subsidies to China's Auto-Parts Industry from 2001 to 2011’, Economic Policy Institute Briefing Paper 316.Google Scholar
Harrison, A. and Rodriguez-Clare, A. (2010) ‘From Hard to Soft Industrial Policies in Developing Countries’, VOX CEPR Political Portal.Google Scholar
Hestermeyer, H.P. and Nielsen, L. (2014) ‘The Legality of Local Content Measures under WTO Law’, Journal of World Trade 48(3), 553–591.Google Scholar
Hirschman, A. (1945) National Power and the Structure of Foreign Trade. Berkeley, CA: University of California Press.Google Scholar
Hopewell, K. (2016) Breaking the WTO: How Emerging Powers Disrupted the Neoliberal Project (Emerging Frontiers in the Global Economy). Stanford, CA: Stanford University Press.Google Scholar
Hout, T. (2020) ‘Abandoning Globalization Will Only Hurt US Businesses’, Harvard Business Review, 20 August 2020.Google Scholar
Howell, S., Lee, H., and Heal, A. (2014) ‘Leapfrogging or Stalling Out? Electric Vehicles in China’, Harvard Kennedy School Belfer Center Discussion Paper RWP14-035.CrossRefGoogle Scholar
Huang, Y. (2008) Capitalism with Chinese Characteristics: Entrepreneurship and the State. New York: Cambridge University Press.CrossRefGoogle Scholar
Hurley, J., Morris, S., and Portelance, G. (2018) ‘Examining the Debt Implications of the Belt and Road Initiative from a Policy Perspective’, GGD Policy Paper 121.Google Scholar
Johnston, A. (2001) ‘Treating International Institutions as Social Environments’, International Studies Quarterly 45(4), 487–515.CrossRefGoogle Scholar
Kent, A.E. (2002) ‘China's International Socialization: The Role of International Organizations’, Global Governance 8(3), 343–363.CrossRefGoogle Scholar
Keohane, R.O. and Nye, J.S. (1977) Power and Interdependence: World Politics in Transition. Boston: Little, Brown.Google Scholar
Knorr, K. and Trager, F.N. (1977) Economic Issues and National Security. Lawrence, KS: University Press of Kansas.Google Scholar
Lardy, N.R. (2014) Markets Over Mao: The Rise of Private Business in China. Washington, DC: Peterson Institute for International Economics.Google Scholar
Lardy, N.R. (2019) The State Strikes Back: The End of Economic Reform in China? Washington, DC: Peterson Institute for International Economics.Google Scholar
Lee, G. (2018) ‘Sluggish Performance of Hyundai Motor Group Affiliates Last Year’, Maeil.Google Scholar
Li, X. and Liu, A.Y. (2019) ‘Business as Usual? Economic Responses to Political Tensions between China and Japan’, International Relations of the Asia-Pacific 19(2), 213–236.CrossRefGoogle Scholar
Liebman, B.L. and Milhaupt, C.J. (eds.) (2015) ‘Introduction’, in Liebman, B.L. and Milhaupt, C.J. (eds.), Regulating the Visible Hand?: The Institutional Implications of Chinese State Capitalism. Oxford and New York: Oxford University Press.CrossRefGoogle Scholar
Lin, J. and Chang, H.-J. (2009) ‘Should Industrial Policy in Developing Countries Conform to Comparative Advantage or Defy It? A Debate between Justin Lin and Ha-Joon Chang’, Development Policy Review 27(5), 483–502.CrossRefGoogle Scholar
Martin, L.L. and Simmons, B.A. (1998) ‘Theories and Empirical Studies of International Institutions’, International Organization 52(4), 729–757.CrossRefGoogle Scholar
Milhaupt, C.J. and Zheng, W. (2016) ‘Why Mixed-Ownership Reforms Cannot Fix China's State Sector’, Paulson Institute.Google Scholar
Miller, E.A. and Miller, H.B. (2007) ‘A Review of Trips and Trims Enforcement Issues in the People's Republic of China: Background and Analysis of the Intellectual Property Protection and Enforcement Crisis Facing US Industry’, The Trade Lawyers Advisory Group, LLC.Google Scholar
Ministry of Commerce (2011) ‘Ministry of Commerce Announcement No. 84 of 2011 on the Implementation of Anti-Dumping and Countervailing Measures on Certain Imported Automobiles from the United States’, www.mofcom.gov.cn/article/b/c/201112/20111207879064.shtml.Google Scholar
Ministry of Commerce (2019) ‘2019 Annual Report of High Quality Development of China's Automotive Trade’, www.mofcom.gov.cn/article/jiguanzx/201912/20191202925949.shtml.Google Scholar
Mundy, S. and Hille, K. (2019) ‘The Maldives Counts the Cost of Its Debts to China’, Financial Times.Google Scholar
Musacchio, A. and Lazzarini, S.G. (2015) ‘Chinese Exceptionalism or New Global Varieties of State Capitalism’, in Liebman, B.L. and Milhaup, C.J. (eds.), Regulating the Visible Hand? Oxford and New York: Oxford University Press, pp. 403–432.CrossRefGoogle Scholar
Naughton, B. and Tsai, K.S. (2015) State Capitalism, Institutional Adaptation, and the Chinese Miracle. Comparative Perspectives in Business History. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Noble, G.W., Ravenhill, J., and Doner, R.F. (2005) ‘Executioner or Disciplinarian: WTO Accession and the Chinese Auto Industry’, Business and Politics 7(2), 1–33.CrossRefGoogle Scholar
Norris, W.J. (2016) Chinese Economic Statecraft: Commercial Actors, Grand Strategy, and State Control. Cornell University Press.Google Scholar
Oh, S. (2013) ‘Fragmented Liberalization in the Chinese Automotive Industry: The Political Logic behind Beijing Hyundai's Success in the Chinese Market’, The China Quarterly 216, 920–945.CrossRefGoogle Scholar
Oh, S. (2015) ‘How China Outsmarts WTO Rulings in the Wind Industry’, Asian Survey 55(6), 1116–1145.CrossRefGoogle Scholar
Ornelas, E. and Puccio, L. (2020) ‘Reopening Pandora's Box in Search of a WTO-Compatible Industrial Policy? The Brazil–Taxation Dispute’, World Trade Review 19(2), 249–266.CrossRefGoogle Scholar
People.Cn. (2016) ‘MIIT Suspends Subsidies for Ternary Lithium Batteries, Analyzes That It Will Curb Enterprise Expansion’, http://energy.people.com.cn/n1/2016/0225/c71661-28148615.html.Google Scholar
Qin, J.Y. (2006) ‘WTO-Plus’ Obligations and Their Implications for the World Trade Organization Legal System – an Appraisal of the China Accession Protocol’, Journal of World Trade 37(3), 483–522.Google Scholar
Reilly, J. (2013) ‘China's Economic Statecraft: Turning Wealth into Power’, Lowy Institute for International Policy.Google Scholar
Ren, Z. (2019) ‘Report on Development of China's New Energy Vehicle 2019’, Evergrade Research Institute.Google Scholar
Rubini, L. (2012) ‘Ain't Wastin’ Time No More: Subsidies for Renewable Energy, The SCM Agreement, Policy Space, and Law Reform’, Journal of International Economic Law 15(2), 525–579.CrossRefGoogle Scholar
Russel, D.R. and Berger, B. (2019) ‘Navigating the Belt and Road Initiative’, Asia Society Policy Institute.Google Scholar
Sauvé, P. (2016) ‘Life beyond Local Content: Exploring Alternative Measures of Industry Support in the Context of WTO Accession’, Journal of International Trade 1, 1–28.Google Scholar
Shen, S. (2016) ‘How China's “Belt and Road” Compares to the Marshall Plan’, The Diplomat, 6 February 2016.Google Scholar
Simmons, B.A. (2000) ‘International Law and State Behavior: Commitment and Compliance in International Monetary Affairs’, The American Political Science Review 94(4), 819–835.CrossRefGoogle Scholar
State Council of China (2010) ‘Decision of the State council on Accelerating the Fostering and Development of Strategic Emerging Industries’, http://www.lawinfochina.com/display.aspx?lib=law&id=8570.Google Scholar
State Council on China (2015) ‘Notice of the State Council on Issuing the “Made in China 2025)”’, http://www.gov.cn/zhengce/content/2015-05/19/content_9784.htm.Google Scholar
United States Trade Representative (2008) ‘WTO Panel Finds against China's Taxation of US Auto Parts’.Google Scholar
United States Trade Representative (2017) ‘USTR Report to Congress on China's WTO Compliance’.Google Scholar
United States Trade Representative (2018) ‘Section 301 Report into China's Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation’.Google Scholar
United States Trade Representative (2019) ‘2019 Trade Policy Agenda and 2018 Annual Report of the President of the United States on the Trade Agreements Program’.Google Scholar
Wang, C. (2017) ‘BAIC-Hyundai Bickering Bursts into Public View’, Global Times, 6 September 2017.Google Scholar
Wauters, J. and Vandenbussche, H. (2010) ‘China – Measures Affecting Imports of Automobile Parts’, World Trade Review 9(1), 201–238.CrossRefGoogle Scholar
Weiss, J.C. (2014) Powerful Patriots: Nationalist Protest in China's Foreign Relations. New York: Oxford University Press.CrossRefGoogle Scholar
World Bank (2019) Belt and Road Economics: Opportunities and Risks of Transport Corridors. Washington, DC: World Bank Group.Google Scholar
World Trade Organization (n.d.) ‘China and the WTO’, www.wto.org/english/thewto_e/countries_e/china_e.htm.Google Scholar
Wu, M. (2015) ‘Rethinking the Temporary Breach Puzzle: A Window on the Future of International Trade Conflicts’, Yale Journal of International Law 40(1), 261–324.Google Scholar
Wu, M. (2016) ‘The “China, Inc.” Challenge to Global Trade Governance’, Harvard International Law Journal 57(2), 16–35.Google Scholar
Yang, D.L. and Jiang, J. (2012) ‘Guojin Mintui: The Global Recession and Changing State-Economy Relations in China’, in Yang, D.L. (ed.), The Global Recession and China's Political Economy. New York: Palgrave Macmillan.CrossRefGoogle Scholar
Zheng, Y. and Huang, Y. (2018) Market in State: The Political Economy of Domination in China. Cambridge and New York: Cambridge University Press.CrossRefGoogle Scholar