41 Wu, 279.42 Rajah, Roland. “Uncertain Future for China’s State Capitalism.”Nikkei Asian Review (Tokyo), October 26, 2017.43 OECD Directorate for Science, Technology and Innovation. Excesscapacity in the global steel industry: The current situation and ways forward.Paris: OECD, 2015. .44 Lawder, David. “IMF’s Lagarde says China needs to do more to cut steel capacity.” Reuters News(Yogyakarta), March 1, 2018. article/us-imf-lagarde-china-steel/imfs-lagarde-says-china-needs-to-do-more-to-cut-steel-capacity-idUSKCN1GD661.45 Kenderdine, Tristan. “China’s Industrial Policy, Strategic Emerging Industries and Space Law.” Asia & the Pacific Policy Studies 4, no. 2 (May 2017): 325-342.46 U.S. Chamber of Commerce and American Chamber of Commerce in China. Priority Recommendations for U.S.-China Trade Negotiations from the U.S. Chamber of Commerce and American Chamber of Commerce in China.Washington, DC: American Chamber of Commerce and American Chamber of Commerce in China, 2019. .Despite the rapid growth in its economy and acceptance of a role for competition and markets, the CCP remains firmly in control.40,41At its 19th Party Congress, China described its economy as “socialism with Chinese characteristics for a new era.”42The state sets economic goals and allocates resources to achieve them through industrial policy and providing platforms for SOEs. China is not the first country with an economic model premised on state control and coordination between the government and business on economic and trade priorities. Elements of all these systems were, and continue to be, present in places like Japan, with the keiretsu, or South Korea, with its chaebols. Yet the impact of China’s economy is different from both Japan and Korea. Due to its sheer size—as the world’s second largest economy—how China grows will affect the rest of the world in ways that even Japan’s economy at its economic height did not. China’s economic model has a range of growing economic implications for the U.S. and globally. First, the move towards self-sufficiency in emerging technologies is inconsistent with a trading system based on comparative advantage. Second, use of SOEs, their access to subsidies and limited rule of law in China support state companies within China and globally. Third, China’s use of industrial policy to pick winners is expected to lead to excess production and dumping overseas. This has already occurred for instance in steel and solar PV with negative impacts for U.S. and global industries in terms of output and innovation,43,44and is expected to occur in more advanced industries identified in China’s recent industrial policies, such as robotics, high-speed rail production, new energy vehicles, and batteries.
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