In 2015, China adopted “Made in China 2025” to upgrade its manufacturing sector and to engage firms in contributing to state priorities including economic growth and national security. Since 2015, the media and academics have noted that manufacturing firms of more strategic importance received more subsidies. However, firms manufacturing cutting-edge products do not necessarily mean that they are willing to meet the state’s political goals. This article argues that China grants more subsidies to manufacturing firms more connected to the party-state. Data on manufacturing firms listed in China supports the argument. Data also demonstrates that when manufacturing firms are more politically connected, the positive effects of subsidies on local manufacturing growth and on firm-level productivity tend to decrease. The symbiotic relationship between politically connected firms and the party-state may curb on the growth momentum, which contradicts one of the key goals of “Made in China 2025”: economic growth.
