Executive Summary

China is entering a new phase of industrial policy—one that is broader in scope, deeper in its reach across supply chains, and more consequential for global markets than the earlier Made in China 2025 era. A recent report from Rhodium Group, prepared for the U.S. Chamber of Commerce, provides a comprehensive assessment of how Beijing’s state-led strategy is evolving. The findings point to a systematic expansion of government intervention from targeted sectors to an entire hybrid ecosystem of manufacturing, services, and frontier technologies.

From Sectoral Targeting to an Industrial Policy of Everything

A decade ago, Made in China 2025 outlined development goals for ten strategic emerging sectors, including new energy vehicles, aerospace, and information technology. That strategy was controversial precisely because it involved significant state support to help domestic companies close technical gaps and overtake foreign competitors. Now, the report argues, China has moved beyond sectoral targeting. Current policy frameworks address mature industries facing overcapacity and upstream inputs such as critical minerals, wafers, and magnets—many of which China already dominates. They extend downstream into applications, services, and technologies that have not yet achieved commercial scale, such as artificial intelligence, quantum computing, and future energy systems.

This development is described as an “industrial policy of everything.” Beijing is not retreating in response to domestic economic constraints or international criticism; instead, it is doubling down. In mature sectors with surplus production capacity, authorities are enabling companies to upgrade production technologies, lower costs, and capture greater market share rather than imposing structural capacity cuts. In newer areas, policy attention is turning to demand-side measures, including public procurement and state-owned enterprise purchasing, to create early markets for emerging products. Artificial intelligence, in particular, has become a central focus.

Tightening Coordination in a Constrained Environment

China’s industrial strategy is evolving under more difficult fiscal and macroeconomic conditions. Economic growth has slowed, domestic demand remains weak, and local government finances are strained. The efficiency of capital allocation is falling. Instead of scaling back interventions, Beijing is adapting through recentralization. The government is tightening control over fiscal spending, bank lending, capital markets, and state investment funds, seeking to concentrate resources on strategic priorities. Guidance funds are being consolidated, and policy banks are increasingly directed through targeted relending facilities. Local incentives are being scrutinized, with wasteful tax subsidies eliminated.

The report points to a reinsertion of non-market considerations into the core DNA of banks, state-owned enterprises, and investment markets. This shift may sustain the implementation of industrial policy in the medium term, but it raises questions about long-term economic vitality and the efficiency of resource allocation. There is already evidence of declining corporate profitability, weak private investment, and slower R&D growth in some key sectors. The new approach may therefore carry significant long-term costs even if it succeeds in advancing state-defined industrial targets.

Accelerating Global Impact

The global consequences are becoming clear. Since 2019, China’s manufacturing trade surplus has roughly doubled to approximately $2 trillion, according to the report. This is a consequence of both rising exports and successful import substitution. It represents a “China Shock 2.0” that is deeper and more widespread than the first phase of China’s integration into global markets.

Foreign dependence on Chinese supply chains continues to deepen. The report also notes that Beijing now deploys policy tools to entrench its position in global value chains and to counter foreign diversification efforts. Chinese firms are expanding abroad more aggressively, supported by a state apparatus designed to project industrial strength.

The impact is not limited to traditional manufacturing. Dependencies are expanding into services, data processing, and emerging technology ecosystems. In advanced sectors where China remains reliant on imports—such as high-end semiconductors and aerospace—the strategic gap persists, but the overall direction of travel is clear: China’s economic power is increasingly intertwined with state strategy, and the global economy must adjust.

What This Means for Business and Policy

Multinational companies need to reassess their exposure to Chinese markets and Chinese supply chains. The dual-use of government support and domestic market access creates a competitive environment where foreign versus local positions shift in ways that are hard to predict. For policymakers in North America, Europe, and Asia, the challenge is to design responses that address not only import dependencies but also the structural and strategic nature of China’s economic model.

The report serves as a corrective to the delayed response that followed Made in China 2025. Early warnings from think tanks and business associations were largely realized, yet many governments were slow to act. The window for effective countermeasures is finite. The analysis underscores the importance of industrial capacity, investment in innovation, and coordinated approaches to supply chain resilience.

The Outlook: Competition, Dependency, and Systemic Risk

Over the next three to ten years, the structural trends identified in the report are likely to intensify. Chinese industrial policy will continue to shape global market conditions, often in ways that create pricing pressure and strategic dilemmas for competitors. The rapid scaling of new industries, supported by state demand, may accelerate China’s advance in future industries such as AI, quantum, and clean energy. At the same time, internal inefficiencies and overextension could dilute the effectiveness of industrial policies, leading to misallocation of capital and slower productivity growth.

For global supply chains, the key question is how to manage dependence on Chinese inputs while preserving access to China’s huge market. No single company or country can resolve this tension unilaterally. Successful adaptation will require a mix of diversification, investment in domestic capabilities, and stronger international coordination.

The evolution of China’s industrial policy is not a transient trend. It represents a structural shift in the global economy. Executives, investors, and policymakers who interpret this shift accurately—and act before the next round of market disruption—will be better positioned to navigate an increasingly competitive and state-influenced global landscape.

Source: Rhodium Group, “China’s Next-Generation Industrial Policy,” prepared for the U.S. Chamber of Commerce.