While the recent revival of industrial policies in the West may have raised the eyebrows of proponents of free markets, their use (and abuse) has long been a pillar of China’s catch-up policy in science in technology.
It is therefore no surprise to hear that the Chinese government is planning to pour more than USD 2 billion over 5 years to push the development of the biotechnology sector – the latter is actually one of them strategic industries picked by the State Council. The central planners hence pursue the new drug R&D scheme launched in 2009 and coupled with the long-term aim to develop indigenous intellectual property.
On the one hand, massive investment in the biotechnology sector makes sense since Chinese firms and research institutes would have a hard time competing with established and deep-pocketed foreign competitors in the chemical drug sector. On the other hand, the issue with industrial policy always comes back to which of the government or the market is best at allocating resources. Some Chinese researchers are already complaining about spreading the funds on too many projects and focusing too much on state research institutes and state-owned companies rather than private start-up companies.
Whether this new scheme ends as a success or failure of industry policy only the market can tell.