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davide's avatar
5dEdited

Another great piece, very interesting to see a breakdown of these political relations. This sort of "relative autonomy" that's needed makes perfect sense as a requirement for good development. I think one of the biggest blockers of industrial policy success right now in the developed nations is no one wants to use the stick (and they barely use the right carrots). The Chinese state hasn't been without contradictions, but it's ability to discipline in some ways has been greater.

Also curious what program you're using to make graphics?

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Al Barry's avatar

My experience in China indicates that ferocious price wars are common. Years back a guest piece in HBR explained price wars as a strategy and used the example of the microwave oven appliance industry. State directed capital has proven to be directionally effective, but the allocation of capital, as you clearly explain, is not efficient. There is no incentive for local governments to constrain their support for a local business that has a multiplier effect for the local economy. Perhaps this is where private investors, risking their own funds, could provide market discipline that the local government cannot. Private, market focused, VC-PE-Angel investors, would stop funding the weaker competitors earlier than a local government.

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