A paper titled "Industrial policy in a new era: Government venture capital in the US–China trade war", co-authored by Joy Chen, lecturer at School of Economics of Renmin University of China (RUC); Robin Kaiji Gong, assistant professor at Hong Kong University of Science and Technology; and Li Jinlin, associate research fellow, China Institute of Finance and Capital Markets of the China Securities Regulatory Commission, has been published in the Journal of Development Economics.

Abstract of the paper:

Government venture capital (VC) is a core component of China's industrial policy framework. This study documents a novel feature of government VC under geopolitical tensions: During the 2018–2019 US–China trade war, government VC funds sustained their investments in manufacturing industries targeted by the US tariffs, in contrast to an overall withdrawal of private capital. This persistence had important implications for startup financing and innovation. Startups heavily exposed to tariff shocks were more likely to secure follow-on financing from government VC, especially if they had stronger innovation track records and produced more patents if their localities had higher ex ante government VC activity. Collectively, these findings suggest that government VC, as an emerging instrument of industrial policy, helped underpin the resilience of China's high-tech industries in the face of geopolitical risks.

About the author:

Joy Chen is a lecturer at the School of Economics, Renmin University of China. She holds a PhD in Economics from Stanford University. Her research interests include economic history, historical political economy, institutional economics and the contemporary Chinese economy. Her work has appeared in leading academic journals such as American Journal of Political Science, Journal of Development Economics, Journal of Economic History, and Journal of Economic Behavior & Organization. 

Joy Chen