Huang Xianhai: "Enabling" industrial policy represents a third major layer for macroeconomic policy

DATE: 2024-04-27

Huang Xianhai:

The following is a summary of Huang Xianhai's keynote address to attendees at the Sixth Annual Conference of Government and Economics held at Tsinghua University, Beijing, on April 27, 2024. Dr. Huang is Vice President of Zhejiang University and Executive Director of the Research Center for Regional Coordinated Development at Zhejiang University.


On April 27, 2024, the Sixth Annual Conference of Government and Economics, co-hosted by the Society for the Analysis of Government and Economics (SAGE) along with Tsinghua University's School of Social Sciences and the Academic Center for Chinese Economic Practice and Thinking (ACCEPT), was convened on campus at Tsinghua University. Vice President of Zhejiang University and Executive Director of the Research Center for Regional Coordinated Development at Zhejiang University, Huang Xianhai, delivered a keynote address to attendees at the conference discussing the importance of an enabling industrial policy as a component of overall macroeconomic policymaking.

Huang Xianhai expressed that the relationship between government and the market is not only a fundamental consideration for how to steer Chinese-style modernization, but is also a basic issue concerning how China is to go about handling its relations with the rest of the world. In short, the present question is how to maintain the characteristic features of the Chinese economy while remaining compatible with the world. What is known as "enabling government behavior" refers to the neutral and inclusive empowerment of market players and their dynamic competitiveness, government behavior that supports the creation of a market-friendly environment and the promotion of innovation. More specifically, when compared with the typical "regulatory government," an "enabling government" not only will ensure that a general range of rules and regulations for a competitive market are put into place, but will also take actions that impact upon market players beyond the realm of  "regulatory" controls. Furthermore, when compared with the selective interventions of a traditional "developmental government," the involvement of an "enabling government" revolves around providing neutral support for market players to benefit from opportunities, favorable conditions and platforms for development in emerging areas of economic activity. When undertaking interventions in a market economy, the actions and behavior of an "enabling government" comprises three distinctive features: one is avoid price distortions, the second is avoid biased selectivity, and the third is to avoid beggar-thy-neighbor or zero-sum games, the latter of which can also be colloquially called preserving friendly plurilateral and bilateral relations.


If a proactive fiscal policy and a prudent monetary policy can be described as China's first and second most important macroeconomic policies, then an "enabling" industrial policy can be categorized as its third most important macroeconomic policy. In terms of pathways for implementation and related measures, Huang suggested that there are at least four main aspects worth paying attention to. The first is the discovery of new future industries, which means intervening when most opportune in those fields that provide the chance for patents that secure intellectual property rights with both shorter and longer-term life cycles. The second involves making full and effective use of the government's capacity to direct funding resources into those areas that promote industrial innovation. The third entails fostering new and emerging innovative organizations, especially those organizations that are able to combine industry value chain and platform-based innovations into one comprehensive institutional framework. The fourth focuses on encouraging the exploration of new models for the commercialization of innovations in the science and technology industry based on the three-pronged framework of "empower, commercialize and reap returns."

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