China Reimagines Industrial Policy Toolkit for Technological Self-Reliance
According to the International Desk of Webangah News Agency, China is redefining its industrial policy toolkit to achieve technological self-reliance amidst intensifying tech rivalries with the West. The nation is moving beyond traditional export development and extensive subsidies, embracing a new model focused on technological self-sufficiency, capital guidance, strategic industries, and proactive government involvement in the market. This strategic shift, driven by geopolitical pressures, slowing economic growth, and local government financial constraints, is profoundly transforming China’s economic structure and has significant implications for global technology competition, supply chains, and international trade.
For four decades, China leveraged exports, investment, and global value chain integration to become the world’s largest industrial production hub. Now, it is redefining its economic growth engine. While past industrial policies prioritized increasing production capacity, acquiring foreign technology, and enhancing export competitiveness, under President Xi Jinping, the focus has markedly shifted. Technological self-reliance, supply chain resilience, economic security, and leadership in advanced technologies have become the cornerstones of China’s industrial policy.
This strategic pivot is more than an economic recalibration; it reflects a fundamental change in Beijing’s perception of technology’s role in great power competition. Technology is now viewed not just as an economic driver but as a critical component of national security and a tool for geopolitical advantage. U.S. technology restrictions on companies like Huawei and ZTE, the tariff wars, export controls on advanced chips, and escalating competition over emerging technologies have reinforced the Chinese policymakers’ conviction that reliance on foreign technology creates strategic vulnerabilities.
In response, the Chinese government has revamped its industrial policy toolkit. Where direct subsidies, cheap credit, and extensive state investment were once primary tools, the current approach emphasizes guided investment funds, targeted tax incentives, directed bank lending, specialized capital markets, intelligent regulation, and the Party’s structural influence in economic entities. The objective is to transition the government from a direct financier to a “state investor,” leveraging market mechanisms to achieve strategic goals while maintaining a decisive state role.
Recent experiences highlight that this new model, despite advancements in electric vehicles, batteries, renewable energy, and certain advanced technologies, also presents new challenges. These include intensified competition among local governments, the emergence of overcapacity, and heightened trade tensions with major economies. Consequently, China’s new industrial policy is influencing not only its domestic economy but also the trajectory of technological competition, the security of supply chains, and the global economic order.
This report, drawing on research from the Rand Corporation’s study on China’s techno-industrial strategy in the Xi era, examines the key dimensions of this strategic restructuring, including novel policy tools, financial and institutional mechanisms, the roles of the state and private sector, and the domestic and international ramifications. This path is poised to determine China’s standing in the global economy and technology landscape in the coming decade.
Significance for Policymakers and Planners in the Islamic Republic of Iran
The importance of this report for policymakers and planners in the Islamic Republic of Iran extends beyond understanding China’s industrial development experience. It illuminates how a development-oriented governance model evolves when confronted with geopolitical competition, technological constraints, and economic security imperatives. China’s experience demonstrates that in an era of escalating great power competition and tightening access to advanced technologies, industrial policy success hinges less on financial resources and more on the quality of governance, institutional coordination, targeted capital direction, state-market interaction, and the capacity to design innovative policy instruments.
While China’s experience is not directly replicable due to structural, institutional, economic, and international differences, studying its governance logic, institutional coordination, policy instruments, and responses to challenges such as sanctions, economic security, and global competition can open new horizons for strategic discussions on the future of industrial and technological policy in Iran.
1. China’s Industrial Policy History: From State Industrialization to Technological Self-Reliance Strategy
Unlike many emerging economies, China’s industrial policy has consistently been a component of its broader strategy to restore national power and enhance its international standing. From early modernization efforts in the late Qing Dynasty to technology development programs under Xi Jinping, Beijing’s leaders have pursued a singular goal: building a nation capable of competing with and ultimately surpassing advanced global powers in industry, technology, and the economy.
This objective has been pursued through various tools and approaches over the past seven decades. During the planned economy era, the focus was on heavy industry and achieving industrial self-sufficiency. Following the initiation of reform and opening-up policies in the late 1970s, this shifted towards market-based development, attracting foreign investment, and integrating into global production chains. Today, China is entering a new phase where technological self-reliance and leadership in advanced industries are paramount.
From Planned Economy to Market Reforms
After the establishment of the People’s Republic of China in 1949, industrial development followed the Soviet model, with a focus on heavy industries, steel, machinery, and defense to lay the nation’s industrial foundations. Initiatives like the Great Leap Forward and the Third Front strategy, despite incurring significant economic costs, cemented the concept of strategic self-sufficiency as a constant in Chinese policymaking—a concept now re-emerging as supply chain security and technological independence.
A pivotal moment arrived in 1978 with Deng Xiaoping’s economic reforms. The government gradually reduced direct economic intervention, established Special Economic Zones, attracted foreign investment, and expanded exports. Over the next three decades, China became a major destination for foreign investment and a global manufacturing powerhouse, driven by low labor costs, technology transfer from foreign firms, and integration into global value chains.
Despite these shifts, the government never relinquished its strategic role in guiding industrial development. The establishment of the National Development and Reform Commission in 2003 and the approval of medium- and long-term plans for science and technology development in 2006 signaled Beijing’s continued reliance on industrial policy to enhance technological capabilities, even as market mechanisms expanded. During this period, support for indigenous innovation, development of strategic industries, and reduction of dependence on foreign technology progressively entered the agenda.
The 2008 Crisis: The Government’s Return
The 2008 global financial crisis marked another turning point for China’s industrial policy. While many economies faced deep recessions, Beijing implemented massive economic stimulus packages and extensive investments in infrastructure and emerging industries, not only maintaining its economic growth but also strengthening the government’s role in directing industrial development. This period saw the implementation of policies supporting strategic emerging industries, with increased investment in areas such as renewable energy, advanced equipment, information technology, electric vehicles, and biotechnology. This experience provided the institutional and financial groundwork for China’s current techno-industrial policy and demonstrated the government’s capacity to steer technological development through centralized resource mobilization and planning.
Strategic Shift Under Xi Jinping
With Xi Jinping’s ascent to power in 2012, China’s industrial policy entered a distinct phase. While previous decades focused on increasing production capacity, boosting exports, and acquiring foreign technology, the priorities have now shifted towards technological self-reliance, economic security, and leadership in advanced technologies.
In this new paradigm, technology is no longer merely a factor for productivity or economic growth but a key component of China’s national security strategy. U.S. restrictions on companies like Huawei and ZTE, controls on advanced chip exports, and intensified geopolitical competition with the West have led Chinese leaders to conclude that dependence on foreign technology represents a critical vulnerability.
Consequently, over the past decade, the Chinese government has redefined its industrial policy objectives. Concepts such as self-reliance, supply chain resilience, indigenous innovation, and technological leadership have replaced metrics that previously emphasized export expansion, employment, and capacity growth. This shift in official discourse, coupled with concentrated investments in fields like semiconductors, artificial intelligence, biotechnology, next-generation batteries, advanced medical devices, and quantum technologies, signifies a profound alteration in China’s industrial development priorities.
Three Key Drivers of the Strategic Shift
An examination of recent developments reveals that this strategic pivot is the result of three concurrent internal and external factors.
First, after four decades of rapid growth, China’s economy is facing declining productivity, rising labor costs, and diminishing returns from the traditional export-oriented model. Sustaining economic growth necessitates a move towards high-value-added industries and an innovation-driven economy.
Second, intensified geopolitical competition with the United States and its allies has made technological security a primary concern for Beijing. Restrictions on advanced technology exports have led Chinese leaders to believe that achieving independence in key technologies is a prerequisite for maintaining economic and political security.
Third, political and ideological considerations play a role. The Communist Party of China views technological development not only as a means to enhance economic capabilities but also as part of its project for the “great rejuvenation of the Chinese nation” and the consolidation of political legitimacy. Success in advanced industries is seen as bolstering China’s standing in great power competition and enhancing its capacity to manage external pressures.
The 15th Five-Year Plan: Consolidating the New Path
This strategic transformation is also reflected in China’s 15th Five-Year Plan (2026-2030). The plan identifies the creation of a “modern industrial system,” enhancing productivity, strengthening the real economy, and achieving high-level self-reliance in science and technology as key national development priorities.
Unlike previous plans that emphasized expanding production capacity and rapid economic growth, the new document focuses on improving the quality of growth, developing frontier technologies, and translating scientific achievements into industrial advantages. In essence, Beijing is aiming to shift its economic growth engine from investment and exports to innovation and technology—a change that could significantly impact not only China’s economy but also the dynamics of global technological competition.
2. Restructuring Governance and the New Industrial Policy Toolkit: How Beijing Transformed the State into an Innovation Engine
If China’s new industrial policy is its roadmap for technological competition, its governance structure and implementation tools are the driving force behind this strategy. Over the past decade, Beijing has concurrently transformed its economic decision-making architecture while shifting development goals. The aim has been to enhance coordination among policymaking bodies, centralize power within the Communist Party, and utilize financial and regulatory instruments to steer capital toward strategic industries.
Experts believe the key difference in industrial policy under Xi Jinping compared to previous eras lies not just in the choice of priority industries but in the governance approach. In the new model, the state’s role has evolved from mere regulator or subsidy distributor to a “strategic and investor state” that directs market activity using a suite of financial, institutional, and regulatory tools.
Centralization of Power: Directing Industrial Policy from the Party
A significant feature of the new structure is the gradual shift of decision-making authority from ministries to high-level Party institutions. This trend, initiated in 2012, has accelerated in recent years with the formation of central commissions for science, technology, and finance, placing industrial policy direction more firmly under Party leadership.
This evolution continues a process that began in the 1990s with the consolidation of dispersed economic bodies and the establishment of the National Development and Reform Commission. It entered a new phase after the 2008 financial crisis with the creation of the Ministry of Industry and Information Technology. However, under Xi Jinping, the decision-making structure has moved beyond ministries to a system where supreme Party commissions uniformly set technological, industrial, and financial priorities and oversee their implementation.
The stated objective of this restructuring is to reduce decision-making fragmentation, improve coordination among executive agencies, and expedite resource mobilization for strategic projects—elements considered essential by Chinese leaders for competing with advanced economies and countering Western technological restrictions.
The Governance Paradox: Centralized Decision-Making, Decentralized Execution
Despite unprecedented centralization of power at the national level, the execution of industrial policies largely falls to provincial and local governments—a major structural challenge for China’s industrial policy. The central government defines macro-level objectives, priority industries, and financial frameworks, but project implementation, investment attraction, industrial park development, and company support are primarily handled by provinces.
This has led to intense competition among local governments to secure resources, establish similar industries, and gain central government support. In many cases, this competition has resulted in the duplication of production capacity across provinces, parallel investments, and increased debt for local governments—a phenomenon Chinese economists refer to as “involution,” where increased investment does not necessarily lead to greater productivity or innovation.
Consequently, a key focus of recent reforms has been to control this competition and enhance coherence between national policies and local government performance.
Three Strategies to Curb Local Competition
To mitigate implementation inconsistencies and prevent resource wastage, Beijing has initiated a series of institutional reforms:
- Revised Evaluation Metrics for Local Officials: Previously, GDP growth was the primary measure of success for provincial officials. Now, metrics such as innovation, technological development, investment quality, environmental protection, and supply chain security are also considered.
- Enhanced Central Oversight of Local Governments: Party inspections, digital monitoring systems, and disciplinary controls have increased oversight of industrial policy implementation, aiming to prevent resource diversion and unnecessary projects.
- Advancing the “Unified National Market” Initiative: This aims to reduce trade barriers between provinces, standardize regulatory frameworks, and prevent local protectionism that hinders the formation of an integrated market.
The New Industrial Policy Toolkit: From Subsidies to Capital Guidance
Concurrent with governance restructuring, industrial policy tools have also evolved. While in previous decades direct subsidies, cheap credit, and low-cost land were primary support instruments, Chinese policymakers now employ a more complex set of financial, credit, and regulatory tools. The new model seeks to guide investor and company behavior rather than directly financing projects. Guided investment funds, targeted tax incentives, special credit facilities for strategic industries, specialized financing markets for tech companies, and regulations on data, competition, and corporate governance constitute the core of this new toolkit.
In this setup, the market serves as an executive arm of industrial policy, its direction shaped by credit, tax, and regulatory policies, rather than operating as an alternative to the state.
Transitioning from Broad Subsidies to Targeted Support
Financial constraints on local governments and rising public expenditures have prompted Beijing to reconsider its approach to industrial support. Consequently, broad, untargeted subsidies are gradually being replaced by instruments that impose less fiscal burden on the government. Tax incentives, credit facilities, R&D support, government procurement, technology standardization, and market regulation policies are now employed more frequently for strategic industry development than cash subsidies. This shift not only eases pressure on public budgets but also allows for more precise resource allocation to sectors like semiconductors, artificial intelligence, advanced medical devices, quantum technologies, electric vehicles, and clean energy.
The Investor State: China’s New Economic Governance Model
The sum of these developments indicates China’s industrial policy is transitioning from a subsidy-based model to an “investor state” model. In this paradigm, the state plays a less direct role in financing and instead uses financial tools, capital markets, banking systems, state-owned enterprises, and regulations to channel capital toward national priorities. This transformation is a defining feature of industrial policy under Xi Jinping, aiming to bridge the decisive role of the Communist Party, market capacities, and the demands of global competition. However, the success of this model hinges on Beijing’s ability to manage local competition, prevent resource wastage, and maintain a balance between political control and market dynamism.
3. The Investor State: How Beijing Mobilized Financial Resources, State-Owned Enterprises, and the Private Sector for its Technology Strategy
While the restructuring of the governance system forms the backbone of China’s new industrial policy, its financial system serves as its engine. Contrary to the common perception that industrial policy equates to state subsidies, Beijing’s new model emphasizes capital guidance. Here, the state acts more as a coordinator and allocator of resources than a direct spender.
In this framework, state-owned banks, investment funds, capital markets, SOEs, and even private firms function as components of a coordinated network to achieve national strategic objectives, ultimately directing financial resources toward technologies Beijing deems crucial for its future economic security and competitive advantage.
The Investor State: Moving Beyond Subsidy Policy
A significant shift in China’s industrial policy has been the transition from a subsidy-oriented state to an investor state. Previously, industrial support heavily relied on cash subsidies, cheap land, subsidized energy, and low-interest loans. However, increasing fiscal pressure on local governments and the need for greater productivity have pushed Beijing toward adopting less costly and more targeted instruments. Under the new model, instead of directly providing funds to businesses, the state channels capital flow toward priority industries through capital markets, the banking system, and investment funds. This shift reduces the burden on public budgets, allows for greater oversight of resource allocation, and enhances the flexibility of industrial policy.
State-Guided Funds: The Technology Investment Arm
The most critical tool in this model is Government Guidance Funds—funds that combine public and private capital to finance strategic projects. Over the past decade, these funds have become the primary channel for technology investment in China. Their numbers have grown from fewer than a hundred in 2014 to over 2,100 by 2024, with their committed capital exceeding 13 trillion yuan. Unlike traditional development funds, these entities do not directly manage companies but instead guide resources toward priority industries through professional investors. A significant portion of these investments is concentrated in areas such as semiconductors, AI, robotics, advanced equipment, biotechnology, new materials, EVs, and green technologies.
A prime example is the massive semiconductor industry fund, which has become China’s key instrument for reducing dependence on foreign technology and developing its chip production chain. To enhance the efficiency of these funds, Beijing implemented regulatory reforms in 2025 and 2026, including measures to prevent hidden debt, reduce redundant investments by local governments, increase transparency, and create mechanisms to encourage fund managers to embrace long-term technological risks.
State-Owned Banks: The Industrial Policy Credit Arm
China’s banking system has also taken on a new mission in tandem with the evolution of industrial policy. While in previous decades a large portion of bank credit was directed toward the real estate market and infrastructure projects, the primary mandate of state-owned banks now is to finance strategic technologies and advanced industries. The People’s Bank of China, using tools like relending facilities, channels financial resources to commercial banks, urging them to allocate credit to companies in advanced manufacturing, AI, green technologies, medical devices, and the digital economy. Consequently, credit policy, much like fiscal policy, has become an integral part of the overarching industrial policy strategy, with the banking system playing a more active role in achieving national technological goals.
Capital Markets: From Corporate Financing to National Strategy Realization
Capital markets have also transformed from purely financial platforms into tools for implementing industrial policy. The launch of the STAR Market on the Shanghai Stock Exchange, reforms to Shenzhen’s ChiNext market, and the establishment of the Beijing Stock Exchange were all aimed at facilitating financing for technology and innovation-driven companies. In these markets, acceptance criteria are no longer solely based on short-term profitability but also consider innovation capacity, strategic technology development potential, and the company’s role in achieving national industrial objectives.
Simultaneously, the government has utilized instruments like “golden shares” to maintain its influence in major technology firms. These shares, typically representing a small ownership stake, grant special rights such as voting power or veto rights on certain strategic decisions, allowing the government to oversee areas like data, cybersecurity, and content.
State-Owned Enterprises: Key Players in Strategic Industries
Despite the expanding role of the market, SOEs remain the bedrock of China’s industrial policy. In recent years, the government has undertaken extensive reforms to enhance their efficiency, not for privatization, but to create more competitive, effective, and loyal entities aligned with the Communist Party’s strategic priorities. SOEs are broadly categorized into commercial enterprises competing in domestic and global markets, and those involved in infrastructure, energy, defense, telecommunications, and national security.
Concurrently, by merging large enterprises and reducing the number of central SOEs, the government aims to create larger “national champions” capable of global competition. These entities are now the primary implementers of massive infrastructure projects, 5G network development, data centers, aerospace, nuclear energy, and quantum technologies—sectors requiring substantial long-term investment and returns that the private sector alone cannot fully undertake.
The Private Sector: China’s Innovation Engine
In contrast, Beijing has defined a distinct role for the private sector. While SOEs are responsible for infrastructure and capital-intensive industries, the private sector is tasked with driving innovation in competitive industries and emerging technologies. AI, robotics, biotechnology, software, the digital economy, and a significant portion of the EV value chain are areas where private companies are leading. However, the expanding role of the private sector does not imply reduced government oversight. In recent years, Beijing has used anti-monopoly laws, data regulations, cybersecurity requirements, and strengthened Party units within large companies to align their activities more closely with national goals. Regulatory actions against companies like Alibaba, Tencent, and Didi are viewed in this context—an effort, from the government’s perspective, to prevent the formation of economic powers independent of state authority and to align the digital economy with national security strategy.
Alongside this regulatory approach, the government has also implemented extensive support programs for tech-focused private companies. The “Little Giants” program, which covers thousands of specialized technology firms, is a prime example. These companies benefit from tax exemptions and easier access to credit, investment funds, industrial land, and capital markets.
Division of Labor Between State and Market
The culmination of these developments suggests China is neither moving toward a fully state-controlled economy nor adopting the Western free-market model. Instead, a guided economy model is emerging, where the state directs capital flow but delegates significant execution to the market. In this division of labor, SOEs manage command heights of the economy, including energy, infrastructure, defense, and capital-intensive technologies, while private companies drive innovation, technology commercialization, and global market competition. In many strategic industries, these two sectors operate complementarily: the state provides infrastructure and initial capital, while the private sector handles technological development and market entry.
This integrated model has become a defining characteristic of China’s industrial policy, attempting to reconcile market capacities, state financial power, and the Communist Party’s strategic objectives. Its success, however, depends on maintaining a balance between political control, economic efficiency, and innovation incentives—a balance many analysts consider the most critical test of China’s industrial policy in the coming decade.
4. China’s Industrial Policy on the Global Stage: From Technology Export to Redefining Great Power Competition
The evolution of China’s industrial policy is not confined to its domestic economic restructuring. Beijing is now seeking to replicate, on an international scale, the model it employs domestically for technology development, capital guidance, and strengthening strategic industries. Consequently, China’s industrial policy is no longer merely a national development plan but has become a tool for expanding economic influence, shaping global supply chains, and redefining the rules of technological competition worldwide.
As geopolitical competition between China and the United States intensifies, Beijing is aiming to reduce its reliance on Western technology while simultaneously increasing other countries’ dependence on Chinese technology, capital, and standards. This strategy transcends domestic borders, making industrial policy a pillar of China’s foreign policy and economic security.
The Belt and Road Initiative: The Foreign Arm of Industrial Policy
In recent years, the “Belt and Road Initiative” (BRI) has evolved from a large-scale infrastructure project into a platform for exporting China’s industrial and technological capacities. While early phases focused on constructing ports, railways, and power plants, technology, digital, and green energy projects now constitute a larger share of China’s overseas investments. Beijing promotes this shift as part of a “high-quality cooperation” approach, prioritizing digital infrastructure, green technologies, smart cities, telecommunications networks, and joint industrial chains over costly and risky projects.
Within this framework, the Digital Silk Road has become a key instrument for exporting Chinese technology. Developing communication networks, data centers, cloud infrastructure, digital payment systems, and smart technologies in partner countries not only creates new markets for Chinese firms but also extends Chinese technical standards and digital ecosystems beyond its borders. Concurrently, the Green Silk Road serves as a platform for exporting clean energy technologies, including solar equipment, wind turbines, advanced batteries, and the EV value chain—sectors where China has made substantial investments and now holds significant competitive advantages.
Capital and Standards Diplomacy
Another less-visible dimension of China’s industrial policy is its effort to influence global technology rules and standards. In recent years, Beijing has increased its presence in international standardization bodies and simultaneously sought to establish Chinese firms’ technical standards as accepted benchmarks in global markets. This strategy is particularly evident in areas such as 5G communications, electric vehicles, smart devices, the Internet of Things, and digital technologies.
China’s outward investment policy has also shifted from a quantitative approach to a targeted one. Investment in areas like semiconductors, robotics, biotechnology, advanced materials, and green industries is prioritized, while investments in sectors such as real estate, entertainment, and non-productive activities face greater restrictions. This redirection indicates Beijing’s intent to align foreign investment with its strategy for technological advancement and supply chain security.
Overcapacity: A Point of Friction with the Global Economy
Alongside technological achievements, China’s new industrial policy has also had implications for the global economy. Extensive investment in strategic industries has led to production capacity in areas like electric vehicles, batteries, solar panels, steel, and industrial equipment that outstrips domestic demand growth. Consequently, a significant portion of this capacity is being directed to global markets, leading to a marked increase in China’s industrial exports.
This trend has heightened concerns among major economies about overcapacity and unfair competition. The United States, the European Union, and several industrialized economies argue that extensive state support, cheap access to capital, land, and credit for Chinese producers distorts global market competition and places undue pressure on their domestic industries.
Beijing, however, refutes these criticisms, emphasizing that Chinese firms’ competitive advantage stems from long-term investment in innovation, infrastructure development, and productivity gains, rather than solely from state support.
Challenges Facing Beijing
Despite significant progress, China’s industrial policy faces substantial domestic and international challenges. Domestically, declining local government revenues, a property market crisis, rising debt, and limited financial resources are straining the government’s capacity for continued large-scale investment. Simultaneously, inter-provincial competition for similar projects has led to duplicated capacity and reduced investment returns in some industries.
Internationally, technology export restrictions, trade tariffs, controls on Chinese outbound investment, and Western efforts to diversify supply chains are complicating the realization of Beijing’s long-term goals. Furthermore, as the state’s role in guiding the economy grows, maintaining a balance between political control and market incentives becomes increasingly difficult. Chinese policymakers must strike a balance between national security imperatives, economic efficiency, and fostering an environment for innovation—a balance that will determine the success or failure of China’s new development model.
Outlook: Competition Over Technology, Not Just Trade
Developments in recent years suggest China’s industrial policy has entered a phase that transcends mere support programs for production development. It has become a core pillar of China’s grand strategy to enhance national power, elevate its geopolitical standing, and compete with advanced economies. In this context, the 15th Five-Year Plan solidifies the development of a modern industrial system, productivity enhancement, scientific and technological self-reliance, and the strengthening of advanced industries as key national priorities.
This direction indicates Beijing’s intent to deepen its chosen path through refining financial instruments, improving institutional coordination, and focusing more intensely on frontier technologies. The future of this strategy, however, will be increasingly dependent on the international environment. If Sino-Western competition continues on its current trajectory, China’s industrial policy will become more intertwined with security considerations, technological constraints, and geoeconomic rivalry. In such a scenario, the primary focus of competition will shift from mere trade or export volumes to countries’ ability to control strategic technologies, command supply chains, and set global standards for the digital economy and advanced industries.
From this perspective, the redefinition of China’s industrial policy toolkit is not just an internal governance shift; it is part of a larger transformation in the global political economy. Beijing aims to leverage a combination of state guidance, market mechanisms, and extensive innovation investment to elevate its status from the “world’s factory” to a “defining technological power.” The extent to which this strategy succeeds will not only shape China’s future but also influence the dynamics of great power competition and the architecture of the global economy for decades to come.
5. Conclusion: China’s Industrial Policy and the Future of Technological Power Competition
China’s industrial policy evolution cannot be viewed merely as a change in economic instruments or development plans. Over the past decade, it has represented a redefinition of the roles of the state, market, and technology in its development model. Industrial policy has transitioned from a tool for increasing production and exports to a strategy for enhancing national power, ensuring economic security, and solidifying China’s position in global competition.
In this journey, Beijing has moved beyond four decades of investment-led growth and integration into the global economy, now seeking a new engine for development based on innovation, advanced technologies, targeted investment, and supply chain resilience. In this paradigm, the state guides the market rather than replacing it, utilizing a network of financial institutions, SOEs, private enterprises, and policy instruments to direct national resources toward strategic priorities.
This approach has yielded significant results. China’s rapid advancements in areas such as electric vehicles, advanced batteries, renewable energy, digital infrastructure, and certain emerging technologies demonstrate the success of its new industrial policy in mobilizing resources and building technological capacity. Conversely, Western technological restrictions, trade pressures, rising local government debt, concerns about production overcapacity, and the difficulty of balancing political control with market dynamism remain critical challenges.
Indeed, the success of China’s industrial policy is no longer solely dependent on its domestic economic performance. It is now defined within the context of the geoeconomic and technological competition among major powers, where access to strategic technologies, control of supply chains, mastery of industry standards, and the capacity to mobilize capital are as critical as traditional metrics like GDP or trade volume.
Therefore, China’s industrial policy should be seen as part of a broader reconfiguration of the global political economy, where governments, even in advanced economies, are once again playing a more active role in guiding industrial development, supporting strategic technologies, and bolstering economic security. China’s distinction lies in the scale of its investment, institutional coherence, and its ability to simultaneously mobilize financial, industrial, and political tools to achieve long-term objectives.
Ultimately, the central question is no longer whether China uses industrial policy, but rather how effectively this governance model can balance innovation, economic efficiency, and political control, and whether it can elevate China from the “world’s factory” to a “defining technological power.” The answer to this question will not only illuminate China’s future but also shape the trajectory of great power competition, the structure of global supply chains, and the technological order of the 21st century. Consequently, China’s industrial policy evolution is no longer solely a domestic or economic issue but one of the most significant variables determining the future of international economy and politics.
