Exporting distortions: Chinese industrial policy and the European response

The effects of China's industrial policy are felt beyond its borders. On the one hand, foreign companies see their trade with China reduced, while at the same time those same companies must compete in other markets with Chinese businesses that have benefited or are benefiting from its industrial policy, which tilts the playing field. So, what begins with a gradual erosion of market share in China becomes a decline in market share in other countries. In other words, market distortions that begin in China do not stay in China. 

This paper focuses on Chinese industrial policy and its repercussions for the global economy. It studies the case of medical technology goods to show how Chinese industrial policy moves from the general – strategic plans and general lines – to the specific – increased market share for Chinese companies in the medical technology sector. Deciphering the Asian giant's industrial policy “playbook” in this sector allows us not only to understand how its industrial policy applies in a given industry, but also to untangle the process by which economic policy acts as a lever to position Chinese companies at the technological vanguard in other sectors.