China’s technology and innovation policies are interpreted by the West as covert efforts to subsidise its own producers for making them globally competitive. Western businesses feel China’s innovation policies are similar to its policies for maintaining export competitiveness, which involve subsidies on raw materials and inputs (both fixed and variable, like land and electricity) and preferential access to bank credit. These state-driven incentives along with a pegged currency are taken by the West as the main drivers of China’s export success. Western businesses believe that China’s emphasis on SEIs would be qualitatively similar. SEI policies would also have the Chinese state investing large resources in building capacities in these industries. The foremost expenditures will be on R&D and technological progress. These will be pushed through large subsidies, generous tax incentives and concessional access to credit. Furthermore, if these industries are to be the main contributors to economic growth in China in the medium term, then there is every possibility of their being preferred in state procurement. In other words, the Chinese state’s efforts to boost capacity and competitiveness in exports will now be replaced by similar efforts in developing SEIs.
How correct are these perceptions? Given China’s history of the state playing a heavily proactive role in economic growth, they could well be correct. But why would the state’s role in promoting technology and innovation irk other businesses?