'Made in China 2025' and the Limitations of U.S. Trade Policy

Abstract

Made in China 2025 (MIC 2025) is emblematic of China’s 21st century industrial policy. Substantial government-directed resources support private-sector efforts consistent with the plan, the heart of which is to acquire advanced technology. Industrial robots and plug-in electric vehicles are two targeted technologies for which China is capturing ever-greater market share domestically. Industrial policy is enabling this progress, although there are signs of inefficiency, especially in terms of government subsidies. And it may be too early to tell if China will lead in pushing the technology frontier outward through indigenous innovation. From a US perspective, trade policy offers a limited set of tools to address China’s challenge. Outside of trade policy, the most promising policy option is to increase government investment in pre-commercial research and development.