China is supporting its local industry with the help of huge subsidies and an industrial policy targeting 21st century high-tech applications. The reaction of the US and Europe has been a barrage of policy measures to prevent Chinese companies from gaining market share. Yet, if you ask me, only one thing really works…
Common knowledge, well-stated! (I know, common knowledge has in our time become a scarce resource).
This leads to a general policy that I wish a political party would adopt in a strict fashion. Namely: use industrial policy, but don't employ it to "pick future winners", because that leads to the stupidity of investing billions in Hydrogen and whatnot.
Instead, use industrial policy exclusively to level the playing field. If we have pretty clear evidence that Wisconsin is investing 2 bn in flooding the global market with cottage cheese, then offer grants to whoever is producing the damn stuff in Europe.
Very much agreed. If you want to know how to do industrial policy properly, just look at Japan, South Korea or Taiwan after 1950. They all managed to become high-tech powerhouses through the extensive use of industrial policy without the government 'picking winners'. The winners emerged naturally as all companies were allowed to compete with each other. That Samsung, TSMC, etc. emerged as winners was not pre-ordained, which is why some people call Asian style industrial policy "socialism, but it works".
I think if you add defense spending the picture would change quite a bit, and I guess that is how the US ist actually supporting its industrial giants already today...
Yes and no. Yes, the US is already spending a ton of money on defence and thus provides support to GE, Lockheed, etc. But China's subsidies in the defense area are about as high as they are in the US as a share of GDP, so if anything, the defense area is one where the US and China are competing on a level playing field.
'the defense area is one where the US and China are competing on a level playing field '
Nominally but it's a bit more subtle than that: the US defense industry is now so concentrated that a Chinese defense dollar is spend decimals more economically than the US equivalent (25 x a US article said recently).
Plus, WSJ last december, 'the US can afford a bigger military, we just can't build it'.
China is expanding its military 5, 6 x faster than the US. And think of the AUKUS troubles: the aussies may have replaced the French for the Americans but US warfs can't build the subs for AUS unless they further harm their already frustratingly slow naval production line. Even the eventual maintenance for AUS subs is seen as an issue since the upkeep of US subs would suffer - there are two warfs left in the US...
There is a lot of 'China' in US weapons (systems): the average destroyer contains 5 tons of Chinese mined, produced and processed rare earths...
Common knowledge, well-stated! (I know, common knowledge has in our time become a scarce resource).
This leads to a general policy that I wish a political party would adopt in a strict fashion. Namely: use industrial policy, but don't employ it to "pick future winners", because that leads to the stupidity of investing billions in Hydrogen and whatnot.
Instead, use industrial policy exclusively to level the playing field. If we have pretty clear evidence that Wisconsin is investing 2 bn in flooding the global market with cottage cheese, then offer grants to whoever is producing the damn stuff in Europe.
Very much agreed. If you want to know how to do industrial policy properly, just look at Japan, South Korea or Taiwan after 1950. They all managed to become high-tech powerhouses through the extensive use of industrial policy without the government 'picking winners'. The winners emerged naturally as all companies were allowed to compete with each other. That Samsung, TSMC, etc. emerged as winners was not pre-ordained, which is why some people call Asian style industrial policy "socialism, but it works".
I think if you add defense spending the picture would change quite a bit, and I guess that is how the US ist actually supporting its industrial giants already today...
Yes and no. Yes, the US is already spending a ton of money on defence and thus provides support to GE, Lockheed, etc. But China's subsidies in the defense area are about as high as they are in the US as a share of GDP, so if anything, the defense area is one where the US and China are competing on a level playing field.
'the defense area is one where the US and China are competing on a level playing field '
Nominally but it's a bit more subtle than that: the US defense industry is now so concentrated that a Chinese defense dollar is spend decimals more economically than the US equivalent (25 x a US article said recently).
Plus, WSJ last december, 'the US can afford a bigger military, we just can't build it'.
China is expanding its military 5, 6 x faster than the US. And think of the AUKUS troubles: the aussies may have replaced the French for the Americans but US warfs can't build the subs for AUS unless they further harm their already frustratingly slow naval production line. Even the eventual maintenance for AUS subs is seen as an issue since the upkeep of US subs would suffer - there are two warfs left in the US...
There is a lot of 'China' in US weapons (systems): the average destroyer contains 5 tons of Chinese mined, produced and processed rare earths...
#3 https://thediplomat.com/2024/03/busting-6-peak-china-myths/
In 2023 US investments in CN declined but the rest of the west upped the ante, moving away from low tech and increasing high tech investments.
Interesting. What brand of Chinese EV do you like?
I drive a Polestar and am so happy with it, I even wrote a post about it: https://klementoninvesting.substack.com/p/the-beauty-of-simplicity