China’s Next-Generation Industrial Policy: A Systemic Shift with Global Consequences
China’s industrial strategy is expanding beyond targeted sectors to cover the entire economy, accelerating trade dominance and deepening foreign dependencies on its supply chains.
Executive Summary
China’s industrial strategy is evolving in two significant ways. First, it is becoming more systemic and pervasive, extending across all layers of production, from upstream inputs and industrial equipment to downstream applications, services, and frontier technologies. Second, these domestic dynamics are accelerating China’s trade dominance, deepening foreign dependencies on Chinese supply chains, and driving the rapid global expansion of Chinese firms. Beijing is also increasingly deploying policy tools to entrench its dominant position in global value chains and deter foreign diversification strategies.
Introduction
A decade after the launch of Made in China 2025 (MIC25), China is entering a new phase of industrial policy. Rather than retreating in the face of mounting domestic and international pressures, Beijing is doubling down. State intervention across the economy is becoming broader and more consequential for global markets than ever.
Background
In 2015, the U.S. Chamber of Commerce translated the foundational “Green Book” that set out localization targets for MIC25. Subsequent assessments by MERICS (2016), the EU Chamber of Commerce (2017), and the U.S. Chamber (2017) all warned of the competitive pressures that would follow. A 2025 Rhodium Group assessment concluded that MIC25 achieved many core objectives, reducing import dependencies and building globally competitive positions in sectors such as new energy vehicles and information technology, though vulnerabilities persist in high-end semiconductors and aerospace.
Main Analysis
A More Expansive Industrial Policy
China’s next-generation industrial policy marks a shift from targeted sectoral intervention to what can be described as an “industrial policy of everything.” Current policy frameworks cover mature sectors, foundational supply chain nodes, and frontier technologies alike. Beijing is not abandoning mature industries facing overcapacity; instead, it pushes firms to upgrade production technologies, gain market share, and lower costs, rather than cutting capacity. Services—previously neglected—now receive more attention, with gains in software, data processing, and drug development.
Policymakers view the current moment as a window to pull ahead in disruptive technologies like artificial intelligence, quantum computing, and future energy systems. AI has emerged as a central pillar, with public procurement and state-owned enterprises generating demand at scale—a step change in commercialization support.
Refining the Policy Playbook Under Tighter Constraints
This expansion occurs amid slower growth, weak domestic demand, rising fiscal pressures, and declining capital efficiency. Rather than scaling back, Beijing is recentralizing and tightening coordination of financial resources. Government guidance funds are being consolidated, bank lending is steered through targeted relending facilities, and redundant subsidies are being culled. The approach is to direct scarce resources toward strategic priorities.
International Impact
The implications for the global economy are profound. China’s trade dominance is accelerating, with foreign firms increasingly dependent on Chinese supply chains for critical inputs like rare earths, magnets, and wafers. The rapid global expansion of Chinese companies in sectors such as EVs and solar panels is reshaping competition. Efforts by other nations to diversify supply chains face headwinds as Beijing deploys policy tools to entrench its advantages.
Strategic Perspectives
For multinational corporations, the message is clear: China’s industrial policy is no longer limited to a few sectors but affects almost every industry. Companies must reassess supply chain dependencies, monitor policy shifts, and evaluate competitive strategies. Governments need to coordinate responses through trade policy, investment screening, and multilateral cooperation to maintain a level playing field.
Future Outlook (2026–2036)
Over the next decade, China will likely double down on AI and advanced manufacturing, leveraging its scale and state support to gain leadership. However, demographic pressures, debt overhang, and potential geopolitical fragmentation could constrain its ambitions. The global landscape will see intensified competition, with supply chain reconfiguration accelerating. International institutions will face pressure to adapt rules for state-driven economies.
Conclusion
China’s next-generation industrial policy represents a systemic shift with far-reaching global consequences. As the country refines its playbook under tighter constraints, the world must respond with clear-eyed analysis and coordinated action. The window for effective countermeasures, as the past decade has shown, is finite.