We are in a frantic race for post-industrial dominance

livemint.com:

The scale of investment by the world’s two superpowers as they conduct a proxy war through aggressive industrial policies is epic. Given the opaque nature of China’s Communist Party government, the most cited estimate is that even five years ago, China was spending 1.7% of GDP on industrial-policy projects. That ratio has surely gone up since.

This January, the government expanded its goals to include an emphasis on “photonic computing, brain-computer interfaces, nuclear fusion," according to The Economist, and in a classic Beijing micro-management mandate, decreed that research institutes “spend more than half of their basic funding on scientists under 35 years of age." The US spends less than China as a proportion of GDP, but a JPMorgan report last year estimated that the three bills passed in 2021-22 with industrial policy aims would lead to investment of $2.4 trillion. Some find it fashionable to credit China’s leaders with omniscience, but despite China’s lead in, say, manufacturing large battery cells, electric cars, wind turbines or solar panels, US efforts seem better aimed. Improving its creaky infrastructure and making semiconductor chips are worthy goals, especially given the real danger of Beijing invading Taiwan, which dominates global chip production.

The risk for the US is that these initiatives might over-stimulate its economy and keep interest rates high. For Beijing, it is larger still—public debt could rise to unsupportable levels. Beijing’s industrial policy dividends have been impressive thus far.