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In this American Greatness article, Lipton Matthews argues that China’s massive industrial policy machine is not the model of strategic brilliance many American policymakers imagine, but a cautionary example of waste, distortion, and government-driven inefficiency.
- Matthews says industrial policy has made a comeback in Washington because many believe America must answer China’s state-backed push in semiconductors, electric vehicles, shipbuilding, and advanced manufacturing.
- The article argues that China’s industrial policy is extremely expensive, costing roughly 4.4% of GDP in 2023 through subsidies, tax breaks, cheap credit, and below-market land.
- Matthews contrasts this with EU state aid, which he says was about 1.5% of GDP in 2022, making China’s intervention far more intense.
- Rather than boosting productivity, the article cites research indicating that China’s industrial policy has reduced domestic total factor productivity and dragged down GDP by misallocating capital and labor.
- The author argues that government subsidies do not appear to make favored firms genuinely more productive, even within targeted sectors.
- China’s shipbuilding industry is presented as a major case study: Beijing poured the equivalent of roughly $91 billion into the sector between 2006 and 2013, but the payoff was weak and the industry became overcrowded with too many inefficient shipyards.
- Matthews says China’s Strategic Emerging Industries program produced a huge rise in patent counts, but not a meaningful rise in patent quality, international filings, or durable innovation.
- The article warns that industrial policy often rewards measurable volume, such as patent totals or production capacity, rather than true technological breakthroughs.
- Matthews concludes that America should not copy China’s model, because the Chinese example shows how state-directed “national champion” strategies can create bloated industries, politically favored firms, and long-term economic drag.
Read the full story: https://amgreatness.com/2026/06/12/chinas-industrial-policy-ambition-inefficiency-and-a-cautionary-tale-for-america/
