Peking University Economist Justin Yifu Lin Calls Industrial Policy Indispensable for Economic Development

Highlights

• Justin Yifu Lin told the 26th Annual Conference of Chinese Economics that competitive markets and active government are both essential for economic development.
• Lin argues industrial policy is critical for overcoming market failures in sectors like rare earths, where costly infrastructure and expertise create barriers private firms cannot solve alone.
• REEx analysis warns of a Transition Vulnerability Window where China's established processing capabilities give it leverage while Western alternatives remain years from readiness.
• China's state-directed model faces internal contradictions: the same policies that fueled its rise risk generating overcapacity, inefficient capital allocation, and suppressed entrepreneurial initiative.
• Western policymakers are urged to combine market discipline with strategic industrial coordination in critical minerals rather than copying China's model outright.