It’s hard to ignore the current split-screen contrast between the US and China. China recently concluded its Third Plenum, a once-in-five-year conf

A warped hall of mirrors: US-China competition and industrial policy

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2024-10-04 12:30:15

It’s hard to ignore the current split-screen contrast between the US and China. China recently concluded its Third Plenum, a once-in-five-year conference where the CCP sets out an economic strategy for the country. The latest Third Plenum’s recently published resolution was full of non-surprises, doubling down on many ideas already widely discussed. The US, in contrast, stands on the brink of two radically different paths heading into a momentous 2024 election. Add to this an assassination attempt and a last-minute candidate swap, and the betting markets are having a field day.

This is all happening amid big geoeconomic shifts. The US and China used to be economic complements—or so the story goes. China did low-wage manufacturing while the US focused on higher-value services. American companies would come up with products, make them in Chinese factories, and then sell them around the world. “Designed in California, assembled in China.” The original “win-win” relationship.

Now the US and China increasingly see each other as direct economic competitors, fighting for slices of the same pie. This is partly because China has moved up the value chain ( as I’ve written about), challenging the US, Europe, and Japan in high-tech industries from electric vehicles to machine tools. But this is also partly because the US has decided—or realized, depending on how you see it—that letting China take over manufacturing is no longer acceptable. Some things like furniture, toys, and clothing are never coming back. But now there are many industries the US is fighting to get back, like semiconductors and solar cells.