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Does “Made in China 2025” work for China? Evidence from Chinese listed firms

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  • Li, Guangwei
  • Branstetter, Lee G.

Abstract

Economic theories have shown that industrial policy's effectiveness in fostering innovation hinges on its ability to address market failures, stimulate creative destruction, and avert adverse foreign reactions. Conversely, distortions induced by the policy and foreign countermeasures can impede its success. 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' innovation and productivity outcomes. Our findings reveal that while targeted firms by the policy seem to receive increased innovation subsidies and display some indications of a heightened R&D/sales ratio, statistically significant improvements in patenting and productivity are lacking. These results cast doubt on the efficacy of the “Made in China 2025” initiative in achieving its intended goal of promoting the innovation capability of targeted firms, highlighting the theoretical and practical complexities of innovation-focused industrial policies.

Suggested Citation

  • Li, Guangwei & Branstetter, Lee G., 2024. "Does “Made in China 2025” work for China? Evidence from Chinese listed firms," Research Policy, Elsevier, vol. 53(6).
    • Handle: RePEc:eee:respol:v:53:y:2024:i:6:s0048733324000581
    DOI: 10.1016/j.respol.2024.105009
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    More about this item

    Keywords

    “Made in China 2025”; Subsidy; Productivity; Innovation; Difference-in-differences; Panel event study;
    All these keywords.

    JEL classification:

    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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