From industrial policy to competition policy: A discussion based on two debates

Abstract

The effectiveness and fairness of industrial policies are highly controversial topics in the academia both at home and abroad, which involve the basic proposition concerning the relationship of government and market. The governance mode of a well-positioned limited government plays an indispensable role in guiding economic transition and structural change, as well as correcting for market failures. Selective industrial policies are necessary, but they should be used in a prudent manner. Instead, marketization reform that provides the underlying institutional environment is more fundamental and crucial for sustainable economic development. Both theory and practice show that only a limited government can lead to an efficient market and provide effective industrial policies. China still has a long way to go towards a modern economic system, which calls for the transition from the use of industrial policies to the use of competition policies. Especially under the current severe internal and external environment, it is particularly necessary to accurately grasp the basic and fundamental nature of competition policy and the short-term and complementary feature of industrial policy as a reform principle. Only through such marketization reform can the ideal state of a limited government be approached so as to finally establish a modern economic system.