The United States, once a staunch free-market advocate, now increasingly adopts China’s economic strategies. Industrial policies—subsidies, trade barriers, and state intervention—are now mainstream. The Biden administration’s CHIPS and Science Act and Inflation Reduction Act (IRA) received bipartisan support and significant funding, mirroring strategies developed by Beijing over decades. According to Foreign Policy, these policies aim to boost U.S. manufacturing, safeguard supply chains from geopolitical risks, and outpace China in emerging industries.
Subsidies, Semiconductors, and the China Template
The allure and danger of competition fueled by subsidies are evident. The 2022 CHIPS Act allocated $39 billion for semiconductor manufacturing, targeting firms like TSMC. Meanwhile, the IRA unleashed hundreds of billions in clean energy tax credits. As Foreign Policy notes, these programs specifically counteract China’s massive state spending. Yet, U.S. subsidies remain a small fraction of China’s substantial outlays. The CHIPS Act is outmatched by China’s threefold spending on advanced chips, yet private manufacturing investment in the U.S. has surged, energizing strategic sectors and boosting the domestic economy.
This industrial reshape carries risks. Subsidy races can breed overcapacity and market distortions, impacting global partners. Experts and critics of American dirigisme express fears about these unintended consequences in this geopolitical analysis.
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State Capitalism: A Model or a Mirage?
The shift toward state capitalism signals a break from American tradition. According to the standard economic literature, state capitalism involves government steering of major industries and directing investments, aiming to utilize market forces for national objectives. China exemplifies this system, combining market incentives with strong state planning and creating national champions at competitors’ expense.
Critics, from Milton Friedman to modern economists, caution that when governments choose winners—through subsidies, regulations, or ownership—market forces weaken. Competition diminishes while capital allocation becomes politicized. Recent U.S. policy shifts raise concerns that America may inherit not only China’s industrial strength but also its inefficiencies and vulnerabilities. Visible impacts include a sharp shift in American investment toward semiconductor fabs and clean technology, mirroring models in China that sometimes resulted in unsustainable debt and overcapacity.








