When will the unjust pillorying of China by the United States and Europe end? China’s unstoppable economic advance has brought the people of the two continents up against the inconvenient truth that they are no longer able to compete in many key economic areas.
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At the same time, it has prompted them to think in new ways about the need for state-led “industrial policy” rather than relying solely on market-led development, as well as about the need for state capital to supplement private financing.
China’s Belt and Road Initiative has produced a flurry of US and European moves to update their own outdated infrastructure. The US Inflation Reduction Act of 2022 introduced government subsidies for green development – including electric vehicles, where China is a fierce competitor – into the world’s largest economy.
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Long a bastion of private capitalism and free markets, the US has now acknowledged that private enterprise alone cannot guide macroeconomic development and that government policy is essential to balanced economic development.
The European Union has now come up with an EU-wide industrial policy backed by muscular state funding. It has joined the US in recognising the clear fact that government subsidies are needed to nurture growth and a more effective and competitive private sector