Cambridge, ENGLAND — At a recent conference in Berlin organized by the Institute of Asian Affairs of Hamburg, Ireland’s leading China specialist said quite unequivocally that China’s industrial policy has failed. As the speaker has long been known as one of the most vocal supporters of China’s state-owned enterprise system, this was something of a shock.

When Peter Nolan, holder of the Taiwanese funded Sinyi Chair of Chinese Management in Cambridge University, says that China’s industrial policy has failed, people listen. But is he right? Hasn’t the industrial sector in China averaged 20 percent growth (or more) in gross output for more than a decade?

Nolan claimed that Chinese leaders set out develop globally significant Korean-style multinational corporations, “chaebol.” And as China has conspicuously failed to establish such corporations, then its industrial policy must be deemed to have failed.

Nolan was using such criteria as inclusion in the Fortune 500 list of the world’s major companies and the establishment of globally recognized brands as his benchmark. If we use such criteria, then I suppose we must conclude that China’s industrial policy has failed.

But you would be hard put to find a single official statement setting out the establishment of Korean-style chaebol as the objective of China’s industrial policy. I doubt one exists.

China would like to have corporations with global reach. They are working on it. China’s biggest companies, such as COSCO, China Merchants, CITIC, China Resources, Bank of China and Everbright, might not trip off the tongues of economists in ivory towers but they, and many others, are among the largest companies in the world — larger than the largest from most developed companies.

And while there are no Chinese-owned internationally recognized brands yet, this has not stopped China from becoming the 10th-largest trading nation in the short time since liberalization began in 1978. They are quite happy to borrow brand names from others — and many of the Fortune 500 are quite happy to lend them.

And if the real objectives of industrial policy are to provide employment and support rising living standards, who cares “whether the cat is black or white as long as it catches mice”?

China’s industrial policy is multifaceted. It is well on the way to achieving some of its objectives, whether or not they make sense to Western economists and management specialists. If you had to say that there was one overriding objective, it is diversification of ownership aimed at reducing the role of the state sector in industry and encouraging the dynamism of the private sector.

It’s a bit of a mouthful, but it means something — and the government is having some degree of success. Some 50 percent of all industrial output is now produced in the nonstate sector and private firms are creating two-thirds of all new jobs in the sector.

There are problems, but fair’s fair: The trend is in the right direction. There may be difficult years ahead, but it is two steps forward and only one back.

The other thing about China’s industrial policy is that it is a dynamic one. It seems to vary day by day. Perhaps there was a day on which the majority of the Central Committee thought it would be a good thing to have a few chaebol, especially if they thought their sons and daughters stood a chance of being the CEOs, but they have thought a lot of other things too. At the moment they are happiest with firms that propose to invest in the inland provinces, whether or not it makes economic sense.

And whatever else they are, China’s leaders are not stupid. They are aware that the Korean chaebol are no longer quite the thing to write home about, unless it is to scoff at them and impress on the reader the fact that there was never any economic logic to them. They have drained the Korean economy of resources and continue to do so.

In preparation for WTO membership, China’s leaders are now rolling back the sort of protectionism that created the chaebol. Those companies, honed in the cutthroat world of Western capitalism and not in personal connection-ridden Asian capitalism, will give the Fortune 500 a run for their money in the not too distant future.

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