Chinese Economist Criticizes Industrial Policies in China and US

Chinese economist Zhang Weiying criticizes industrial policies in China and the US, arguing they're doomed to fail due to governments' inability to predict innovation. Zhang emphasizes the importance of China's private sector and entrepreneurship in driving economic growth.

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Aqsa Younas Rana
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Chinese Economist Criticizes Industrial Policies in China and US

Chinese Economist Criticizes Industrial Policies in China and US

Zhang Weiying, a prominent Chinese economist, has criticized industrial policies in both China and the United States, arguing that they are doomed to fail due to governments' inability to predict innovation. According to Zhang, China's private sector is the primary driver of economic growth, and entrepreneurship is the key to innovation.

Why this matters: The effectiveness of industrial policies in the world's two largest economies has significant implications for global economic growth and trade. As China and the US navigate complex economic and geopolitical tensions, their policy choices will have far-reaching consequences for businesses, investors, and consumers worldwide.

Zhang's criticism comes as China's economy faces numerous challenges, including an aging and shrinking workforce, weak consumer demand, and a property market downturn. To address these challenges, some scholars are calling for reforms to empower the rural population and support the private sector, highlighting the importance of domestic demand and entrepreneurship in driving China's economic recovery.

China has a mixed socialist market economy with industrial policies and strategic five-year plans. The country has experienced rapid economic growth, with an average GDP growth rate of over 10% annually for over three decades. China is the world's second-largest economy by nominal GDP and the largest economy by purchasing power parity (PPP). The economy consists of public sector enterprises, state-owned enterprises (SOEs), mixed ownership enterprises, and a large domestic private sector.

Zhang's argument that "entrepreneurship is the key to innovation, and China's private sector is the main driver of economic growth" highlights the importance of the private sector in China's economy. In 2022, China accounted for 19% of the global economy in PPP terms and around 18% in nominal terms. The country's average GDP growth rate exceeded 14% annually in some years, and China is the world's largest manufacturing economy and exporter of goods, with surging exports result of significantly devalued renminbi.

However, China's economic growth in the 2020s is slowing down due to challenges such as a rapidly aging population, higher unemployment, and a property crisis. The article also mentions US Treasury Secretary Janet L. Yellen's visit to China in April, where she argued that China's artificially cheap products are harming American and other foreign firms. The article disputes Yellen's claim, stating that China's export competitiveness has strengthened, not weakened, due to the Sino-American trade war.

Zhang Weiying's criticism of industrial policies in China and the US highlights the ongoing debate about the role of government intervention in the economy. While China's state-led economic model has driven rapid growth in the past, the country now faces significant challenges that may require a shift towards greater support for the private sector and domestic demand. As the world's two largest economies continue to navigate complex economic and geopolitical tensions, the effectiveness of their respective industrial policies will remain a topic of intense scrutiny and debate.

Key Takeaways

  • Zhang Weiying, a Chinese economist, criticizes industrial policies in China and the US, citing governments' inability to predict innovation.
  • China's private sector is the primary driver of economic growth, and entrepreneurship is key to innovation, according to Zhang.
  • China's economy faces challenges, including an aging workforce, weak consumer demand, and a property market downturn.
  • Zhang's criticism sparks debate on the role of government intervention in the economy, with some calling for reforms to empower the private sector.
  • The effectiveness of industrial policies in China and the US has significant implications for global economic growth and trade.