FT — China's Comparative Advantage Is Industrial Policy

Source: Financial Times by Tej Parikh

Tej Parikh of the Financial Times argues that Western attempts to imitate Beijing's state-funded industrial policy model are fundamentally misguided. China's comparative advantage is not merely subsidies — it is institutional capacity to coordinate resources.

The Scale of the Gap

Western governments spent over $1 trillion in 2025 trying to counter China's industrial policy. Yet Parikh argues they may be learning the wrong lessons.

China's advantage is structural and institutional, not just financial:

• Blank slate advantage: In renewables and EVs, China built industries from scratch without legacy incumbents or regulatory baggage.
• Coordinated execution: The ability to align state-owned banks, local governments, and manufacturers around a single national strategy.
• Speed of implementation: Infrastructure and factory build-out happens in months, not years.

The U.S. Pivot

The United States is quietly pivoting back to industrial policy — driven not by economic theory but by Pentagon fears. National security concerns about semiconductor supply chains and rare earth dependencies are forcing a reluctant return to state-directed industrial strategy.

What Europe Should Do

Parikh's suggestion for Europe: rather than trying to out-subsidize China, focus on frontier innovation — areas where Europe's research base, regulatory sophistication, and high-value manufacturing give it genuine advantages.

Key Takeaway

China has a comparative advantage in the practice of industrial policy itself. Matching China means not just writing checks, but building the institutional capacity to deploy capital strategically and execute at speed — something no Western democracy has yet demonstrated at scale.