How the Chinese government promoted a global automobile industry Wan-Wen Chu* the Chinese state has practiced pro-active industrial policies effectively in a sector, the automobile industry. It is true that some of the government’s automotive industrial policy, especially that of relying upon foreign joint ventures, were deemed ineffective to promote development. Decentralization, however, allows room for policy experiments by the local governments, and the strong social consensus to catch up with the West propels the central state to continue to improve its policy toward this goal. The main finding is that the industrial policy process in China is a multilayered one, and has to be considered as a whole. With decentralization, the central formulates the policy but has to rely upon the local states to implement it. Lacking embeddedness and hence information channels linking with the enterprises, the central state is usually unable to formulate feasible policy and to monitor industrial progress. The locals may go their own way and experiment with other means to reach the goal, while fiercely competing among themselves. Once a local experiment produces a result which brings the industry a bit closer to closing the gap with the West and attaining the goal of establishing national champions with global brand names, the legitimacy of the new model cannot be doubted and it will become the winning model. The central–local relationship makes the policy process more winding, but the consensus” propels the central state to revise “catch-up the policy to adopt better results from local governments’ experiments. China may lack an East Asian type of integrated central economic bureaucracy with embedded autonomy and strong capabilities to formulate and implement industrial policy, but it instead has model of industrial policy propelled by “a the catch-up consensus.” Findings of this are contrary to the thesis of the ineffectiveness of China’s industrial policy advanced by Naughton (2007a) and others. That is, it is found that the Chinese model of industrial policy propelled by the catch-up consensus has successfully promoted a global automobile industry despite earlier mistakes. Local governments function as developmental states As central planning gradually gave way to the market since 1978, the seventh year plan of 1986 can be viewed as a water- shed for the evolution of post-reform industrial policy, when the term policy” first appeared in the five-year “industrial plan, though referring mainly to industrial structure adjustment. In 1988, the government established the Bureau of Industrial Policy. In 1994, it issued an
How the Chinese government promoted a global automobile industry Wan-Wen Chu* the Chinese state has practiced pro-active industrial policies effectively in a sector, the automobile industry. It is true that some of the government’s automotive industrial policy, especially that of relying upon foreign joint ventures, were deemed ineffective to promote development. Decentralization, however, allows room for policy experiments by the local governments, and the strong social consensus to catch up with the West propels the central state to continue to improve its policy toward this goal. The main finding is that the industrial policy process in China is a multilayered one, and has to be considered as a whole. With decentralization, the central formulates the policy but has to rely upon the local states to implement it. Lacking embeddedness and hence information channels linking with the enterprises, the central state is usually unable to formulate feasible policy and to monitor industrial progress. The locals may go their own way and experiment with other means to reach the goal, while fiercely competing among themselves. Once a local experiment produces a result which brings the industry a bit closer to closing the gap with the West and attaining the goal of establishing national champions with global brand names, the legitimacy of the new model cannot be doubted and it will become the winning model. The central–local relationship makes the policy process more winding, but the “catch-up consensus” propels the central state to revise the policy to adopt better results from local governments’ experiments. China may lack an East Asian type of integrated central economic bureaucracy with embedded autonomy and strong capabilities to formulate and implement industrial policy, but it instead has “a model of industrial policy propelled by the catch-up consensus.” Findings of this are contrary to the thesis of the ineffectiveness of China’s industrial policy advanced by Naughton (2007a) and others. That is, it is found that the Chinese model of industrial policy propelled by the catch-up consensus has successfully promoted a global automobile industry despite earlier mistakes. Local governments function as developmental states As central planning gradually gave way to the market since 1978, the seventh plan of 1986 can be viewed as a water- shed for the evolution of post-reform industrial policy, when the term “industrial policy” first appeared in the five-year plan, though referring mainly to industrial structure adjustment. In 1988, the government established the Bureau of Industrial Policy. In 1994, it issued an year