In this report, the authors examine how China’s techno-industrial policy has evolved under Xi Jinping into a more centralized, security-linked, finance-driven system. They explain how this system operates in practice by organizing Xi-era policy into five channels (fiscal, financial, real economy, Party-firm, and overseas) and 18 instruments through which the Party-state defines priorities, mobilizes institutions and financial resources, disciplines firms and local governments, and projects these arrangements abroad.
Under Xi, China’s techno-industrial policy has shifted from a focus on growth and catch-up toward national security, technological self-reliance, and frontier leadership. The Party-state has overhauled institutions, financing, and corporate governance to direct resources toward priority industries. China’s techno-industrial ecosystem has produced impressive gains in technological capabilities, manufacturing scale, and supply chain resilience in priority sectors.
But the system also generates significant tensions: Centralization risks suppressing the local experimentation that fueled earlier gains, mandates and designations spread the costs of industrial policy to firms and institutions in ways that are difficult to measure, and the politicization of investment and corporate governance may degrade the quality of economic decisionmaking even as it tightens alignment with state priorities. Techno-industrial policy does not resolve China’s underlying demand and productivity problems that increasingly drag on aggregate growth and prosperity.
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