 Industrial policy in a new era: Government venture capital in the US–China trade warY. Joy Chen, Robin Kaiji Gong and Jinlin Li Journal of Development Economics, 2026, vol. 178, issue C Abstract: Government venture capital (VC) is a core component of China’s industrial policy framework. This study documents a novel feature of government VC under geopolitical tensions: During the 2018–2019 US–China trade war, government VC funds sustained their investments in manufacturing industries targeted by the U.S. tariffs, in contrast to an overall withdrawal of private capital. This persistence had important implications for startup financing and innovation. Startups heavily exposed to tariff shocks (1) were more likely to secure follow-on financing from government VC, especially if they had stronger innovation track records and (2) produced more patents if their localities had higher ex ante government VC activity. Collectively, these findings suggest that government VC, as an emerging instrument of industrial policy, helped underpin the resilience of China’s high-tech industries in the face of geopolitical risks. Keywords: Venture capital; Trade war; Industrial policy; Innovation; China (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:178:y:2026:i:c:s0304387825001506 DOI: 10.1016/j.jdeveco.2025.103599 Access Statistics for this article Journal of Development Economics is currently edited by M. R. Rosenzweig More articles in Journal of Development Economics from Elsevier |
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