Why are so many industries in China plagued by overcapacity? Actually, supportive policies from Beijing have a great deal to do with this phenomenon. As soon as central planners announce their intention to develop an emerging industry, investment money comes pouring in because everyone wants to get in on the ground floor.
Officials in China have also begun to rely on such supportive policies. In fact, without access to easy financing, subsidies or other favorable regulations, it seems that local officials would never be able to develop their local economies. Indeed, officials are often quick to pin shortfalls in local growth on policy supports which didn't go far enough.
In theory, China's central policy makers have the power to decide how to distribute the country's resources. In practice though, it is officials who are really in control - and if they want supportive policies to help kick start a certain industry, they can usually find some way to help it grow.
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