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Race to Lead: How China's Government Interventions Shape U.S.-China Industrial Competition

Vyacheslav Fos Stanford University

Date Posted:: October 24, 2022
Is Database:: Database

China’s government support for private firms drove a 15% increase in new domestic firms in targeted sectors, while U.S. peers saw 5% fewer firms and declines in income, employment, and output.

Between 1998 and 2020, sectors targeted by China's Five-Year Plans (FYPs) saw a 15% increase in new domestic firms, while corresponding U.S. sectors experienced a 5% decline in firm births, employment, and output. A 1% rise in employment in China's firms correlated with a 0.1% decline in U.S. sector employment. The displacement effect was driven by China's private firms, which received over half of government subsidies. U.S. industries initially matched growth trends of unsubsidized Chinese sectors but declined post-FYP implementation. The impact shifted from labor-intensive to capital-intensive U.S. industries over time, highlighting the strategic role of China's government support in enhancing its firms' competitiveness and contributing to the relative decline of U.S. industries across the value chain.

“…Between 1998 and 2020 a rise in China’s firm births is correlated with higher firm exits and slower growth one and two years later for U.S. firms in corresponding sectors. A 1% rise in employment in China’s firms predicts a 0.1% decline in employment in the corresponding U.S. sector. The evidence suggests that U.S. industries were not outcompeted by subsidized Chinese firms prior to their being subsidized. However, in the years following a new FYP, the number of China’s firms in targeted sectors surged by 15% compared to non-targeted sectors, while firms and total job postings at U.S. firms in the corresponding sectors experienced a roughly 5% decrease. U.S. firms in these sectors also experienced a decline in earnings and output….”

Xiao Cen, Vyacheslav Fos, and Wei Jiang, "Race to Lead: How China’s Government Interventions Shape U.S.-China Industrial Competition,"Stanford University, August 1, 2022,
https://sccei.fsi.stanford.edu/china-briefs/race-lead

Race to Lead: How China’s Government Interventions Shape U.S.-China Industrial Competition

Between 1998 and 2020, a rise in China’s firm births is correlated with higher firm exits and slower growth one and two years later for U.S. firms in corresponding sectors.

Sectors targeted and subsidized through China’s Five-Year Plans experience a surge in new firms, while the corresponding sectors in the U.S. see declines in firm births, output, employment, and earnings.

China’s earlier Five-Year Plans tend to displace labor-intensive sectors in the U.S., while more recent ones displace capital-intensive sectors in the U.S.

China has become a serious competitor in economic sectors previously dominated by U.S. industry. In recent years, trade conflicts between the two countries have become more common, especially given the view that China’s government intervenes a great deal to help domestic firms compete. Research explores to what extent industries targeted and subsidized through China’s Five-Year Plans (FYPs) have displaced U.S. firms up and down the value chain.

The data. Researchers collected data on 1,643,000 U.S. firms and 1,100,000 Chinese firms from the U.S. Census Longitudinal Business Database (LBD) and the China Industrial Enterprises Database (CIED). Both databases capture firm-level characteristics and changes in economic activities over time, including firm births and deaths, employment, sales, exports, total assets, and others. China’s CIED database also includes data on the amount of state subsidies firms receive. Researchers then organized the merged data from both countries according to industry sector and identified those sectors that China’s government targeted for development in each of its FYPs from 2001, 2006, 2011, and 2016. Researchers supplemented this database with job posting data from 1.28 million U.S. firms between 2007 and 2020 from Burning Glass.

China’s firms displace same-sector U.S. firms. To examine the relationship between trends in industrial activity in China and the U.S., researchers compared the rates of firm births, firm exits, and employment by sector in the U.S. and China between 1998 and 2020. They found that a rise in China’s firm births is correlated with higher firm exits and slower growth one and two years later for U.S. firms in corresponding sectors. Further, they found that a 1% rise in employment in China’s firms predicts a 0.1% decline in employment in the corresponding U.S. sector.

Race to Lead: How China's Government Interventions Shape U.S.-China Industrial Competition: Extended Excerpt Image 1

When disaggregating by firm ownership type, researchers found that this displacement dynamic appears driven by China’s private firms rather than by state-owned enterprises. China’s private firms proliferated rapidly during the period of study and received over half of all government subsidies (53.5%), a higher share than state-owned enterprises (37.7%) and foreign-owned firms (8.8%).

Government subsidies may bolster China’s firms in targeted industries at the expense of U.S. firms. Prior to the release of a FYP, U.S. industries that were counterparts to those supported by the government in China exhibit growth trends similar to unsubsidized industries in China. In other words, the evidence suggests that U.S. industries were not outcompeted by subsidized Chinese firms prior to their being subsidized.

However, in the years following a new FYP, researchers found that the number of China’s firms in targeted sectors surged by 15% compared to non-targeted sectors, while firms and total job postings at U.S. firms in the corresponding sectors experienced a roughly 5% decrease. U.S. firms in these sectors also experienced a decline in earnings and output.

The strength of the correlation held even when removing China’s fastest-growing firms from the analysis, suggesting that the changes were driven by government targeting and subsidies rather than “natural” dynamism occurring irrespective of government support. Researchers also found that capital markets in the U.S. failed to predict any decline in fortunes for U.S. firms in sectors later targeted by a FYP, further suggesting that competition with China’s newly-subsidized firms played a role in the observed decline at U.S. firms.

China’s industrial policy differentially affects U.S. firms, industries. Certain U.S. firms and industries were able to offset the negative impact of China’s industrial policy. U.S. firms that depended heavily on China as a source of revenue and those that relied heavily on China’s imports benefited somewhat from rapid growth in the upstream sectors fostered by China’s industrial policies. In addition, while firms with limited presence in China suffered significantly, some U.S. firms offset the negative effects by offshoring production capacity to China.

Race to Lead: How China's Government Interventions Shape U.S.-China Industrial Competition: Extended Excerpt Image 2

The impact of the industrial policies embedded in the FYPs shifted over time from lower-skilled industries to higher-skilled industries. Early FYPs (i.e., the 10th and 11th plans covering 2001 to 2010) tended to displace production in labor-intensive industries in the U.S. such as consumer electronics, textiles, and furniture manufacturing. However, the more recent FYPs (i.e., the 12th and 13th plans covering 2011 through 2020) squeezed higher capital-intensive industries like telecommunications and clean energy.

China’s government support for industry important in its race to lead. The analysis shows that China’s government support plays a significant role in enhancing the competitive standing of China’s firms. Decisions by China’s government to elevate its global prowess in certain industries has led to the relative decline of such industries in the U.S., not just in low-skill “sunset” industries from which the U.S. may have been happy to retreat, but also in higher-skill industries that both countries are eager to lead.

The Fairest Way to Reform Social Security May Also Be the Worst Way to Grow the Economy

Andrew Biggs American Enterprise Institute

Date Posted:: May 28, 2026
Is Database:: Database
Is Important:: Important

Biggs argues that “fair” approaches to restoring Social Security solvency – those that do not cut already accrued benefits – are less effective than “unfair” ones that do, because the latter incentivize increased work effort, raising growth and revenue.

Imagine that Social Security reform follows the fairness model, in which accrued benefits are paid in full but the rate at which future benefits are earned is reduced. A simple way to do this is to increase the payroll tax rate To keep Social Security permanently solvent, meaning through 75 years and beyond, would require an immediate and permanent increase in the payroll tax rate [from] 12.4% to 17.6%. The higher rate would decrease labor supply and reduce economic growth. [Consider] an alternate reform, which looks clearly unfair: fix Social Security’s funding gap entirely by reducing accrued benefits that Americans already have earned. As of 2025, Americans had accrued $54 trillion in Social Security benefits. Social Security’s unfunded obligation as of 2025 was $26 trillion. So, roughly, this means cutting Americans’ “earned benefits” in half. [Analyzing the 1977 reform that undid the notorious 1972 “double-indexing” of benefits, a group of economists], using SSA earnings data, found that, for every dollar of lost benefits, the affected Americans increased their earnings by 61 cents. Moreover, these additional earnings would be taxed by Social Security, further strengthening the program’s finances. In effect, this makes cutting benefits a “cheaper” way to fix Social Security than raising taxes, because people respond in ways that also increase tax revenues.

Takeaways by Macro Roundup^® AI

A 5.2 pts payroll tax increase to 17.6% drives reduced labor supply and slower economic growth vs. the status quo.
$54 trillion in accrued Social Security benefits vs. the unfunded obligation reveals that benefit cuts would reduce growth drag but.

The World’s Most Surprising Capitalist Makeover Is Under Way in Sweden

Tom Fairless Wall Street Journal

Date Posted:: May 12, 2026
Is Database:: Database

Swedish public social spending is now 23.7% of GDP, just 1pp above that of the US and well under France’s 31.6%. Market-based reforms in the 1990s brought overall government spending down from 69.4% to 49.3% in 2024.

For decades, Sweden was shorthand for the brand of high-tax, high-spend government that managed people’s lives from cradle to grave through state-run hospitals, schools and care homes. No longer. With little fanfare, this Nordic country of 11 million has embraced capitalism. Today, nearly half of primary healthcare clinics are privately owned, many by private-equity firms. One in three public high schools is privately run, up from 20% in 2011. School operators are listed on the stock exchange. The capitalist makeover has allowed Sweden to do what few industrialized countries have managed in recent years: shrink the size of the state. That has enabled the government to sharply lower taxes and, economists say, sparked a surge in entrepreneurship and economic growth. Its total public social spending bill—which includes healthcare, education and all welfare payments—has fallen to 24% of gross domestic product, similar to the U.S. and well below the over 30% for nations like France and Italy. Sweden’s economy is expected to grow by around 2% a year through 2030, roughly the same pace as the U.S. and double the growth rates of France and Germany, according to an April forecast by the International Monetary Fund.

Takeaways by Macro Roundup^® AI

Sweden’s public social spending fell to 24% of GDP, matching the U.S. and 6+ pts below France/Italy, driving lower taxes.
Privately-run primary healthcare clinics reached nearly 50% of the market vs. 20% for high schools in 2011, demonstrating accelerating privatization.
Sweden’s projected 2% annual GDP growth through 2030 doubles France and Germany’s rates, resulting from state downsizing and capitalist sector.

How Policy and Demographics Are Reshaping SNAP: From Families with Children to Older Adults

Angela Rachidi American Enterprise Institute

Date Posted:: May 1, 2026
Is Database:: Database

About 40mm Americans, 12% of the population, receive SNAP benefits, up from 6% in 2000. In 2023, only 34% of these households included children, down from 49% in 2010, while 36% contained an elderly person, up from 16% in FY2010.

Comparing FY2000 with FY2025, the share of the population receiving SNAP doubled from 6% to 12%, while real SNAP costs per capita increased by 179%—from roughly $100 per year to $279 (in 2024 dollars). Despite this growth, per capita participation and costs in FY2025 remained below their pre-pandemic peak in 2013, which coincided with the aftermath of the Great Recession and changes in eligibility and other policies stemming from the 2008 Farm Bill. SNAP is countercyclical, meaning that all else equal, the number of people receiving SNAP should rise during recessions because of increased unemployment and decline as the economy recovers, [though] overall SNAP participation has grown faster than changes in the unemployment rate alone would predict. Over the long run, and especially since FY2020 (due to the Thrifty Food Plan’s increase in the maximum SNAP benefit), costs per capita have not returned to prerecession levels after a period of high unemployment. In FY2023, the share of SNAP households containing an elderly person (36%) exceeded the share containing a child (34%) for the first time. This was a sharp departure from the early 2000s, when more than half of SNAP households contained a child and less than 20% included an elderly person (Figure 2).

Takeaways by Macro Roundup^® AI

SNAP participation doubled from 6% to 12% of the population between FY2000–FY2025, driven by policy expansions and demographic shifts outpacing.
Real per capita SNAP costs rose 179% from $100 to $279 (2024 dollars) over 25 years, with the Thrifty Food.
FY2025 SNAP enrollment remains 8–12% below the FY2013 peak despite 25-year growth, indicating countercyclical policy design successfully targets recession-driven need.

Washington’s Growing Portfolio: Tracking U.S. Government Investments

Jonathan Hillman Council On Foreign Relations

Date Posted:: April 23, 2026
Is Database:: Database

Since January 2025, the USG has taken equity stakes totaling $20.9B in 16 American businesses. $8.6B, ~41% of the total, was invested in critical mineral miners and processors, while $8.9B, ~43% of the total, funded the government’s 10% stake in Intel.

Since January 2025, the U.S. government has invested $20.9 billion across sixteen deals involving direct ownership, broadening a toolkit that has traditionally focused on grants, loans, and tax incentives. The Department of Commerce has participated in six such deals, including taking a 10% stake in Intel. The Development Finance Corporation, the United States’ development bank, has executed three equity transactions in critical minerals, healthcare, and infrastructure. The Department of Defense leads the way with seven such deals. The U.S. government is also working with a range of partners and has mobilized an additional $4.75 billion in investment. Private co-investors include J.P. Morgan, Goldman Sachs, and others.

Takeaways by Macro Roundup^® AI

The U.S. government deployed $20.9bn in direct equity investments since January 2025, expanding beyond traditional grants and loans to drive.
The Department of Defense leads with seven equity deals of the sixteen total, establishing direct ownership as a core national.
Commerce Department’s 10% Intel stake exemplifies government equity participation in critical infrastructure, mobilizing private capital alongside public investment to strengthen.

How Federal Spending is Distributed by Age

Kent Smetters University of Pennsylvania

Date Posted:: April 2, 2026
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Is Important:: Important

In 2025, of the 62.5% of Federal spending that is age-assignable on a per-capita basis, US retirees aged 65+ were given $43,700, working-age adults 26–64 got $7,300, and children and young adults got $4,300.

We trace spending items within 52 general spending categories, totalling $7T for the 2025 Fiscal Year. We are able to classify a total of $4.4T across three broad age categories and assign the remaining $2.6T to an all-ages residual. Retirees (adults age 65 and older) receive $2.7T, equal to 38.6% of total federal outlays and 61.9% of age-assignable spending. Working-age adults (ages 26-64) receive $1.2T (27.9% of age-assignable), and children and young adults (under age 26) receive $449B (10.3%). The dominance of the retiree category reflects two programs above all others: Social Security and Medicare. Social Security directs $1.3T to retirees, and Medicare sends $835B. Together, they account for 80% of all age-assignable spending on older adults. But the retiree total extends beyond these two entitlements. Federal employee retirement benefits ($169B), housing assistance for older households, Medicaid long-term-care spending, and VA medical care all contribute, making the federal budget more retiree-focused than a Social Security–only lens would suggest.

Takeaways by Macro Roundup^® AI

Federal spending heavily favors retirees, who receive 38.6 percent of total outlays through Social Security, Medicare, and related programs.
Working-age adults and children combined receive less than half the spending directed to retirees despite representing larger population segments.
Social Security and Medicare alone account for 80 percent of all federal spending on older Americans, dominating the retiree budget.

Has the United States Bent the Health Care Cost Curve?

David Cutler and Lev Klarnet Brookings Papers On Economic Activity

Date Posted:: March 30, 2026
Is Database:: Database
Is Important:: Important

In 2024, medical spending as a share of GDP was just above its 2010 level and 15% ($977B) below its 2010 forecast; 21% of the gap was due to technology, 24% to price reductions, and 11–27% to reforms such as prior authorization and higher deductibles.

Five factors are important in the slowdown in spending [Figure 16]. The first is technology-associated changes in health and site of care. These correspond to the subsequent innovations in our model. Together, technologies along these lines account for 21% of the overall cost slowdown and double that in Medicare. Second, long-run supply is more elastic than short-run supply, which lowers spending over time. This is particularly apparent in the impact of patent expiration for pharmaceuticals and in relative declines in imaging reimbursement. We estimate that greater long-run supply explains 6% of the spending slowdown. Third, a variety of market changes contribute to reduced and more elastic demand, including increased cost sharing paid by consumers, physicians not paid as much for using technologies, and insurers imposing restrictions on technology use - a rough guess is that these account for 11 to 27% of the spending slowdown. Fourth, the population is healthier in ways that reduce spending. This includes fewer hospitalizations for smoking-related conditions and reduced need for formal home health care. The birth rate has fallen as well, which reduces the need for care. We estimate improved population health explains 7% of the spending slowdown. A major component is slower price growth. Net of upcoding, we estimate lower price growth explains 24% of the spending slowdown.

China’s government support for private firms drove a 15% increase in new domestic firms in targeted sectors, while U.S. peers saw 5% fewer firms and declines in income, employment, and output.

Biggs argues that “fair” approaches to restoring Social Security solvency – those that do not cut already accrued benefits – are less effective than “unfair” ones that do, because the latter incentivize increased work effort, raising growth and revenue.

Does preserving Social Security benefits require sacrificing economic growth?

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Swedish public social spending is now 23.7% of GDP, just 1pp above that of the US and well under France’s 31.6%. Market-based reforms in the 1990s brought overall government spending down from 69.4% to 49.3% in 2024.

How is Sweden's shift to privatization impacting its economic growth?

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About 40mm Americans, 12% of the population, receive SNAP benefits, up from 6% in 2000. In 2023, only 34% of these households included children, down from 49% in 2010, while 36% contained an elderly person, up from 16% in FY2010.

How Are Policy Changes and Demographic Shifts Impacting SNAP Enrollment?

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Since January 2025, the USG has taken equity stakes totaling $20.9B in 16 American businesses. $8.6B, ~41% of the total, was invested in critical mineral miners and processors, while $8.9B, ~43% of the total, funded the government’s 10% stake in Intel.

Takeaways by Macro Roundup® AI

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In 2025, of the 62.5% of Federal spending that is age-assignable on a per-capita basis, US retirees aged 65+ were given $43,700, working-age adults 26–64 got $7,300, and children and young adults got $4,300.

Takeaways by Macro Roundup® AI

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In 2024, medical spending as a share of GDP was just above its 2010 level and 15% ($977B) below its 2010 forecast; 21% of the gap was due to technology, 24% to price reductions, and 11–27% to reforms such as prior authorization and higher deductibles.

Related Articles:

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