Brad Setser: Why China's Incomplete Macroeconomic Adjustment Makes China 2025 a Bigger Risk: "China... wants to 'localize' the production of the bulk of the high tech goods that its economy needs... Made in China 2025... a mix of subsidies (some disguised, as they flow through state-backed investment funds and the financial sectors) and 'Buy China' preferences.... Losses... China is good at both hiding them—and, well, absorbing what at the time seems like large losses as an inevitable cost of its rapid growth. The usual argument against such a mix of industrial policy and protectionism is that it just won’t work. A country that subsidizes its industries ends up with inefficient industries.... But China, is, to use Philip Pan’s phrase, the state that failed to fail...


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