Since Biden took office, there has been a major change in the U.S. industrial policy strategy, and think tanks represented by the Center for a New Security have frequently released a series of reports related to industrial policy, calling on Biden to accelerate the adjustment of industrial policy. We summarized the recent trends and characteristics of U.S. industrial policy, sorted out the major progress made in China's industrial policy since the 18th National Congress of the Communist Party of China, and the risks and challenges it faced, and put forward policy suggestions for the next step.
1. New trends in U.S. industrial policy
Industrial policy refers to the structural policy measures consciously taken to promote the development of specific industries, generally including industrial development policies (including industrial innovation policies), industrial structure policies, industrial organization policies and industrial security policies. The United States has attached great importance to the use of industrial policy and will strengthen industrial policy at critical moments in international competition. At present, the pace of strategic adjustment of the U.S. industrial policy is accelerating, the goal of curbing China's technological upgrading is very clear, the trend of "pan-security" of industrial policy is becoming more and more obvious, and the "selective" development policy of new industries is stronger.
1) The industrial policy has shifted to pay equal attention to "offense + defense", and the trend of "pan-security" of the policy is obvious
In recent years, the United States has introduced a series of innovation-focused industrial policies to accelerate industrial transformation and maintain a lasting competitive advantage. Recently, there has been a major shift in the strategic direction of U.S. industrial policy.
First, there has been a shift in policy focus. Industrial policy has shifted from an "offensive" policy with industrial innovation policy as the main body during the Obama era to a "defensive + offensive" policy with equal emphasis on industrial innovation policy and industrial security policy. The industrial policy of the Obama era aims to seize the commanding heights of global science and technology and enhance the core competitiveness of the United States. Under the guidance of the "America First" strategy, Trump has started a war against China, and the proportion of defensive industrial security policies has increased significantly. After Biden took office, he adjusted the ratio of offensive and defensive policies, especially the signing of the "CHIPS and Science Act", which once again showed that Biden is doing his best to "delay the development of China's science and technology" while "pushing the United States to run faster".
Second, the trend of "pan-security" of policies is becoming more and more obvious. Trump has included "U.S. technological superiority over China" into the category, making it a central justification for the implementation of industrial policy. Recently, Biden promulgated the "Strategy", using industrial security policies to set ceilings and comprehensively curb the upgrading of China's advanced technology, and his practice of science and technology and economic competition with China has shown a comprehensive security trend.
2) The new industry development policy is more "selective".
Biden implements the U.S. "outcompete" strategy against China, comprehensively uses policies such as R&D subsidies, procurement, talent incentives, and promotion, and conducts a comprehensive layout of the innovation chain of emerging industries.
First, it is more selective. On the one hand, a series of policy measures have been adopted around emerging industries such as semiconductors, biotechnology, and new energy, including the introduction of the "Chips and Science Act", "National Biotechnology and Biomanufacturing Plan", and "Infrastructure Act", to provide huge capital investment and subsidies for industrial development. On the other hand, actively seize the commanding heights of future industrial development, Biden inherited Trump's ideas and strategies for developing future industries, increased investment in research and development of emerging technology groups, and proposed in the "American Jobs Plan" to invest $180 billion in research and development of future technologies, and set up future industry research institutes to create new technology management institutions.
Second, the policy tools are more direct. The CHIPS and Science Act provides financial support or tax credits directly to invest in semiconductor factories and purchase equipment and train semiconductor workers in the United States. The Inflation Reduction Act, signed into law in August 2022, contains discriminatory subsidies for electric vehicles, renewable energy generation, sustainable aviation fuel and hydrogen, which has been questioned by economies such as the European Union, South Korea and China, and may even trigger a subsidy race or a new war.
The third is to deregulate the digital economy. In order to support the country's leading enterprises, in recent years, the anti-monopoly actions of the United States against technology giants, both at the legislative and judicial levels, have shown a trend of "thunder and rain". "The legislature puts U.S. companies at an unfavorable pace, thereby undermining U.S. competitiveness" has become an important consideration for Congress's delay in advancing antitrust legislation against tech giants. On the contrary, the EU is now targeting US tech giants with antitrust targets such as the EU's Digital Markets Act (DMA), which came into effect on November 1 and mainly targets US giants such as Google, Apple, Facebook, Amazon and Microsoft.
3) Industrial policy pays more attention to enforceability.
The core issue of the industry is the coordination of various stakeholders, the formation process of industrial policy in the United States, especially the legislative process is a relatively long process, the bill proposed by the Senate and the House of Representatives must be voted on by the Senate and the House of Representatives at the same time, if there is a difference in the resolution process, both houses have the legislative power to amend the bill, after the modification consultation, the Senate and the House of Representatives will vote on the decision, and after the Senate and House of Representatives vote on the bill, it will be signed and put into effect. The process of formulating the bill will go through multiple rounds of discussion and communication, and finally form an implementation plan with clear goals, clear rights and responsibilities, and multi-party recognition of resource allocation, which can fully mobilize the enthusiasm of all parties for policy implementation. For example, the "CHIPS and Science Act", which came into effect on August 9, 2022, was first proposed by Democratic leader Chuck Schumer and others in May 2020 as the "Endless Frontier Act", and later the "2021 Strategic Competition Act", "2021 China Challenge Act" and other related legislation were added as amendments.
After the law came into effect, the responsibilities of various departments were relatively clear and implemented quickly. On September 6, 2022, the U.S. Department of Commerce released the implementation strategy for the subsidy of the CHIPS and Science Act, and on the 8th, the U.S. Science and Technology Advisory Council (PCAST) held a special meeting in Washington to discuss the specific implementation plan of the $11 billion special fund for advanced semiconductor and packaging technology research and development in the CHIPS and Science Act, and put forward ten recommendations for the implementation of the CHIPS and Science Act. At the same time, due to the foreign jurisdiction involved in the suppression of China, the United States has continuously strengthened strategic alliances and technological alliances, improved the effectiveness of industrial policies, especially export control policies, and reduced the cost of policy implementation. For example, the current Indo-Pacific Economic Prosperity Framework and the U.S.-EU** and the Technical Committee (TTC) are the two levers for U.S. implementation in the Indo-Pacific and European regions.
Second, the development status and existing problems of China's industrial policy.
China is a country in the world that uses industrial policies more frequently and more frequently. Since the 80s of the 20th century, China has learned from the industrial policy theory and practical experience of Japan, South Korea, Singapore and other countries to comprehensively implement industrial policy, and gradually form a huge and complex industrial policy system composed of industrial innovation policy, industrial structure policy, industrial organization policy, industrial layout policy and industry special policy. Since the 18th National Congress of the Communist Party of China, China's industrial policy has accelerated the concentration of innovation fields. At this stage, in the face of the complex environment of major changes in the international competition pattern, China's industrial policy has once again become an important means of overall development and security, with the core content of ensuring the safety of the industrial chain and the development of strategic emerging industries and future industries, and entering a period of deep change.
1) China's industrial policy has made remarkable progress.
First, focusing on supporting the development of strategic emerging industries, China's industrial innovation policy system has been gradually improved. ** And all provinces and cities attach great importance to the guiding and supporting role of strategic emerging industries, and have formed an industrial innovation policy system covering all links of the innovation chain and including multi-dimensional collaborative evolution such as "overall framework, subdivided industries, special matters, and regional policies". Through a series of important development tasks, the implementation of major development projects and the creation of an innovative environment, the vitality of industrial innovation is stimulated.
Second, the shortcomings of industrial security policies have been effectively compensated. For a long time, China's industrial policy has been dominated by industrial development policy and industrial technology policy, and the industrial security policy is not well prepared. In response to the suppression by the United States and the West, China has gradually established industrial security policy tools such as export control, foreign investment security review, unreliable entity list, and national technology security management list in recent years.
Third, industrial policy tools have been continuously enriched, and China's industrial development has been supported and regulated from all angles from the supply side, the environment side and the demand side. There are more than 10 kinds of industrial policy tools in China, including R&D support, financial subsidies, tax incentives, intellectual property protection, infrastructure, platform construction, investment and financing, guidance, access rules, procurement, etc., and a more scientific and flexible combination of industrial policy tools is being formed.
2) There are still many problems in China's industrial policy.
First, the lack of systematization of policies and the lack of coordination between departments are still the deepest reasons restricting the solid implementation of industrial policies. As the cross-integration of industries becomes more and more obvious, their development and security involve more departments. If we do not improve the coordination mechanism as soon as possible, and continue to adopt the method of "treating headaches and feet" by various departments, the effectiveness of policy implementation will be greatly reduced.
Second, there is a "misalignment" and "absence" of existing industrial policy tools in supporting industrial innovation. Most of China's existing industrial policies follow the traditional policy paradigm, and do not provide enough technical support for general technology and common technology, and rely excessively on financial subsidies, tax incentives and other tools in the selection of policy tools. Objectively guide the market to increase investment in productive rather than innovative areas;On the other hand, policy tools have not played a good role in promoting source innovation, disruptive technological breakthroughs, and governance of new business forms and models.
Third, there is still a lack of a sound industrial safety policy system. At present, the industrial security policy tools are relatively scattered, and most of the policies that have been introduced have not been effectively implemented due to insufficient supporting measures, so they cannot respond strategically and forward-looking to the systematic and intensive suppression actions of the United States.
Fourth, there are still a large number of provisions in existing industrial policies that are in actual or potential conflict with international rules. At present, China still lacks a comprehensive review mechanism for whether its industrial policy complies with international rules, resulting in insufficient legality and compliance of China's industrial policy, and frequent foreign countervailing investigations and sanctions. According to statistics, from China's accession to the WTO in 2001 to the end of 2018, there have been 14 cases of China's industrial innovation policy, accounting for 1 3 of the total number of cases sued in China, involving as many as 59 industrial innovation policies, which seriously restricts the integration of China's industry into the global multilateral and investment system.
Fifth, the socialization of policy formulation is not highly participatory, scientific is insufficient, and there is a lack of policy effect evaluation mechanism. China's industrial policy formulation is mainly the participation of experts and experts, industry organizations, enterprises and other stakeholders have a low degree of participation, and there are problems such as heavy policy formulation, light supervision and evaluation, lack of incentive and restraint mechanism, etc., resulting in some enterprises driven by interests, rent-seeking and arbitrage behaviors, such as the frequent occurrence of corporate "fraud and compensation", which is contrary to the original intention of the policy.
3. Policy recommendations.
In order to cope with the comprehensive pressure of U.S. industrial policy, China should coordinate development and security, unswervingly formulate and implement industrial policies, enhance the systematization of industrial policies, focus on key areas related to national development and security, strengthen industrial security policies, build policy support for a modern industrial system, improve the scientific level of policy formulation and implementation, shape China's industrial competitive advantage, and ensure national economic security.
1) Enhance the systematization of industrial policy formulation and implementation.
Strengthen the overall coordination of industrial policies, especially industrial innovation policies, break down the segmentation, and establish a high-level coordination mechanism for industrial policies. Further strengthen the role of science and technology management departments in the industrial policy coordination mechanism, focusing on strategic industries such as integrated circuits and biotechnology, and emerging industries such as artificial intelligence and quantum information, and strengthen policy coordination and implementation. According to the stage and characteristics of industrial development, we will continue to strengthen the systematic support for specific industries, and at the same time, strengthen the formulation and implementation of inclusive policies. Establish a response mechanism for major industrial safety incidents, organize inter-departmental dialogues on a regular basis, and strengthen information sharingCarry out emergency coordination in response to sudden major incidents.
2) Strengthen industrial safety policies.
Implement the important deployment of the 20th National Congress of the Communist Party of China on "promoting the modernization of advanced systems and capabilities", and strengthen the reserve and use of industrial security policy tools. Strengthen the security protection of key industrial technologies, and review intellectual property transactions and mergers and acquisitions in key areas. Promote the solid implementation of the Anti-Foreign Sanctions Law and the Export Control Law, and study and formulate countermeasures and tools in accordance with relevant laws and regulations. In the areas of military and human rights, we have carried out reciprocal countermeasures, and studied and stockpiled sanctions lists for military-related issues, ethnic infiltration, and color revolutions. In areas where China has unique advantages, such as critical minerals and super-large-scale markets, we have adopted an asymmetric strategy and pre-researched and reserved a number of "killer" tools as countermeasures to deal with suppression.
3) Policy support for building a modern industrial innovation system.
Reform the direction of resource allocation, shift the allocation of industrial policy resources more to technological innovation, and increase investment in basic research, basic technology and general technology research and development. Through measures such as strengthening tax incentives and establishing joint enterprises, enterprises will be encouraged to increase R&D investment, forward-looking layout of basic cutting-edge technologies, and continuously cultivate the growth points of emerging industries and new tracks for future industries. For new industries, new technologies, new business forms, and new models, local governments are encouraged to adopt "regulatory sandbox" measures to promote their development. Improve the policy support tools for the whole life cycle of the future industry, realize the full coverage of the three stages of basic R&D, small-scale pilot test and industrialization, strengthen the use of supply-side policy tools such as R&D subsidies, technical training, and proof-of-concept platform construction in the basic R&D and small-scale pilot test stages, and use more demand-side policy tools such as strengthening procurement, promoting application demonstration, and encouraging scenario opening in the industrialization stage.
4) Improve the scientific level of policy formulation and implementation.
Starting from the whole life cycle of policies, strengthen the scientificity, compliance and diversified participation of decision-making, reduce redundant industrial planning and policy formulation, and improve the implementation, clarity and predictability of industrial policies. Comprehensively introduce scientific decision-making theories and methods to improve the scientific level of policy making. On the basis of the policy review mechanism, it is necessary to establish a mechanism for the evaluation, adjustment and exit of industrial policies, especially to strengthen the cost-benefit analysis of industrial policies, and take the results of the analysis as an important basis for policy formulation and survival. Strengthen the compliance management of exports and international cooperation of high-tech enterprises, key universities and scientific research institutes.
Authors: Chen Zhi, Xu Hailong, Chen Jian, Institute of Science, Technology and Economic and Social Development, Chinese Academy of Science and Technology Development Strategy.
This article is from WeChat*** China Academy of Science and Technology Development Strategy.
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