The Role of Industrial Policy in High-performing Asian Economies: From Semiconductor and Automobile to Artificial Intelligence

Since WWII, a set of Eastern Asian economies achieved extraordinary rates of economic growth and spectacular improvements in the quality of life. These countries’ ability to maintain high growth rates attracted wide academic and political attention. However, all these high-performing Asian economies were caught by the middle-income trap, showing that the exceptionally high growth was not sustainable. This paper will focus on the four Asian Tigers—Hong Kong, Singapore, South Korea, and Taiwan— and provide a general explanation of the economic success of the high-performing Asian economies. With a focus on the role of industrial policy, it will review how Korea and Taiwan implement industrial policies successfully to grow their tech sectors. Furthermore, this paper will analyze the sustainability of the high growth of the Chinese economy and discuss whether its industrial policy can help it create a state-sponsored push in the AI sector that could potentially help it avoid the middle-income trap