On May 11th, the US Chamber of Commerce released a report titled “China’s Next-Generation Industrial Policy” on its official website. The report reveals that the Chinese Communist Party (CCP) is escalating the use of policy tools, shifting its focus from targeted industry intervention to a more expansive “whole-industry policy.” This shift aims to secure a dominant position in the global value chain and resist foreign diversification of supply chains.
The latest report “China’s Next-Generation Industrial Policy,” jointly released by the US Chamber of Commerce and Rhodium Group on May 11th, assesses that the CCP’s industrial policy is evolving from specific industry strategies to systematic strategies that encompass various production levels and cutting-edge technologies.
The report points out that the CCP is facing a more constrained macroeconomic environment with accumulating restrictions in fiscal and financial systems due to decades of resource misallocation. Against growing domestic and foreign pressures, Beijing is strengthening control over the allocation of public and private resources. This involves reintegrating non-market factors into the genes of banks, state-owned enterprises, and investment markets.
Last year marked the first full decade point since the CCP proposed the “Made in China 2025” initiative. This year is crucial for assessing the strategic effectiveness of the plan. The goal of this initiative is to shift China’s manufacturing focus from quantity to quality, emphasizing core technologies, high added value, and control over the global supply chain.
After evaluating the evolution of the CCP’s industrial strategy and its global competitive impact, the report draws two main conclusions. Firstly, the CCP’s industrial policy is becoming more systematic, covering all aspects of the supply chain from raw materials and industrial equipment to downstream applications and services. Secondly, these measures aim to propel China into a new phase of global influence, deepening foreign reliance on Chinese supply chains and facilitating rapid expansion of Chinese companies globally.
To address past lessons and ensure clarity on competitive landscapes, the report presents an analysis of the CCP’s next-stage industrial policy evolution, providing strategic choices and windows of opportunity for targeted and effective actions by governments, industries, and multilateral institutions.
The report emphasizes that the challenges the world faces are not due to a lack of information. While early warnings were issued regarding the “Made in China 2025” plan, global responses have been insufficient. The delayed responses have led to decreased competitiveness, industrial capacity reductions, and strategic weaknesses that require continuous efforts to resolve.
Significant vulnerabilities exist in China’s industries, particularly in high-end semiconductor, advanced aerospace, biopharmaceuticals, and other areas where Chinese companies have not yet bridged the technological gap. Despite achieving core goals in the state-led industrial movement, China has not fully succeeded in high-tech fields, reflecting ongoing challenges.
Moreover, China faces severe overcapacity issues in certain sectors with unresolved soft demand. The CCP continues to support industries facing overcapacity and price pressures by promoting technology upgrades to gain market share and reduce production costs, rather than cutting capacity. Policy measures to address imbalances and structural reform for transitioning China’s growth model have been inadequate so far.
To seize opportunities in disruptive technology fields like artificial intelligence, quantum technology, and future energy systems, the CCP is stimulating demand through public procurement and large-scale requirements from state-owned enterprises to support related applications and innovation.
Despite softening domestic demand, the CCP has not reduced intervention but is adapting by refocusing resources and improving financial coordination to address limitations. To ensure scarce resources are directed towards strategic priorities, the CCP has reinforced control over fiscal spending, bank loans, capital markets, and national investment funds.
However, the expansion of the CCP’s industrial policy into broader areas may diminish its effectiveness and reduce resource allocation efficiency. The increasing influence over financial markets could further lower resource allocation efficiency, potentially leading to reduced profitability for enterprises, weakened private investment, and slowed development in key industries.
While these actions may boost short-term industrial development, they could also exert pressure on China’s productivity and long-term growth potential, as analyzed in the report.