Working Paper: NBER ID: w30676
Authors: Lee G. Branstetter; Guangwei Li
Abstract: Rising concern over the impact of Chinese industrial policy has led to severe trade tensions between China and some of its major trading partners. In recent years, foreign criticism has increasingly focused on the so-called "Made in China 2025" initiative. In this paper, we use information extracted from Chinese listed firms' financial reports and a difference-in-differences approach to examine how the "Made in China 2025" policy initiative has impacted firms' receipt of subsidies, R&D expenditure, patenting, productivity, and profitability. We find that while more innovation promotion subsidies seem to flow into the listed firms targeted by the policy, we see little statistical evidence of productivity improvement or increases in R&D expenditure, patenting and profitability. This paper suggests that the “Made in China 2025” initiative may have not yet achieved its target goals.
Keywords: Made in China 2025; Chinese industrial policy; subsidies; productivity; R&D expenditure; patenting
JEL Codes: O25; O32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Made in China 2025 initiative (L63) | innovation promotion subsidies (O38) |
| innovation promotion subsidies (O38) | productivity improvement (O49) |
| innovation promotion subsidies (O38) | R&D expenditure (O32) |
| innovation promotion subsidies (O38) | patenting (O34) |
| innovation promotion subsidies (O38) | profitability (L21) |