In the 1980s, improvement in industrial structure was important policy area. As a result, some policy measures to promote growth in strategic industries were adopted in 1982. The government selected certain products in the strategic industries based on the following six criteria: large linkage effect, strong market potential, high value-added, a low energy coefficient, technology intensive and a low level polluter. The majority of the selected products were from the mechanical industry and the information and electronics industry.
The government provides those firms producing the so-called strategic products with special medium-and-long-term low interest loans and technological assistance. The purpose of this paper is to evaluate the effectiveness of those preferential policies aimed towards promoting strategic industries.
Firstly, we survey the relevant literature. Secondly, we use macro-data to examine the general execution of the policy. Third, and the major focus of this paper, we analyze questionnaires which were delivered to four kinds of firms:
(1) those which accepted both the financial and technical assistance.
(2)those which accepted financial assistance only.
(3)those which accepted technical assistance only.
(4)those which didn’t accept strategic assistance.
Several empirical techniques, such as path analysis, principal component analysis, discriminate analysis and Kendall’s coefficient of concordance are adopted in our study.
The major results that were drawn from our study are as follows:
A. It is still an open question whether this kind of industrial policy should be utilized. Generally speaking, unbalanced-growth theory and the infant industry theory tend to depict the beginning stage of economic development Market-determined industrial development tends to depict the well-developed economies.
B. Financial considerations are not the main factors used in the investment decision process of firms. Most firms who opted for assistance would have continued to invest even if they had not accepted the financial assistance. The preferential loans that were given didn’t significantly influence the cost of capital, the amount of investment or the performance of firms.
C. Most firms that were given technical assistance would have pursued other methods to acquire technical assistances even if they had not accepted the government’s assistance in this area. The Government’s technical assistance policy played a role in terms of technical dissemination.
