China's Next-Generation Industrial Policy: Reshaping Global Trade and Supply Chains
An analytical overview of China's evolving industrial strategy, its deepening impact on global supply chains, and strategic implications for businesses and policymakers.
China’s Next-Generation Industrial Policy: From Targeted Sectors to an "Industrial Policy of Everything"
Subheadline
A new phase of state intervention is reshaping global supply chains, accelerating trade dominance, and forcing multinationals to rethink their China strategies.Executive Summary
China’s industrial policy has evolved from the sector-specific goals of Made in China 2025 into a broader, more systemic approach that touches nearly every layer of production, from upstream inputs to frontier technologies. According to a new report by Rhodium Group, commissioned by the U.S. Chamber of Commerce, this next-generation strategy is not retreating in the face of domestic and international pressures. Instead, Beijing is doubling down, expanding state intervention across the economy and using it to cement China’s position in global value chains. The report warns that this approach is accelerating China’s trade dominance, deepening foreign dependencies on Chinese supply chains, and enabling the rapid global expansion of Chinese firms. For multinational companies, policymakers, and investors, the competitive dynamics that were forecast a decade ago have now become embedded features of the global industrial landscape.Introduction
A decade after the launch of Made in China 2025 (MIC25), China is entering a new phase of industrial policy. The initial strategy, which focused on ten strategic sectors, was met with widespread concern from international observers who warned of market distortions and unfair competition. In the years since, China has executed much of what it outlined, achieving substantial progress in reducing import dependencies and building globally competitive positions in sectors such as new energy vehicles and information and communications equipment. However, the report "China’s Next-Generation Industrial Policy" by Rhodium Group, released in May 2026, argues that the current policy framework goes far beyond the original blueprint. It describes a shift to an "industrial policy of everything," where state intervention extends across mature sectors, foundational supply chain nodes, and frontier technologies alike.Main Analysis
The report, authored by Camille Boullenois, Malcolm Black, and Alessia Caruso, identifies two overarching trends. First, China’s industrial policy is becoming more systemic and pervasive. Unlike MIC25, which targeted a defined set of industries, the new approach encompasses everything from critical minerals and wafers to software, data processing, and drug development. In mature industries facing overcapacity, Beijing is not cutting capacity but rather pushing firms to upgrade production technologies to gain market share and lower costs. This approach helps Chinese firms maintain global dominance even in crowded markets.Second, these domestic dynamics are ushering in a new phase of global impact. China’s trade dominance is accelerating, with foreign supply chains becoming increasingly dependent on Chinese inputs. Chinese firms are expanding rapidly in global markets, supported by state-backed resources. Beijing is also deploying policy tools to entrench its dominant position and deter foreign diversification strategies. This includes leveraging demand-side measures, such as public procurement and state-owned enterprises, to create markets for new technologies like artificial intelligence, quantum computing, and future energy systems.
The report notes that China’s policy playbook is being refined under tighter constraints. With slowing growth, weak domestic demand, rising fiscal pressures, and declining efficiency of capital allocation, Beijing is recentralizing financial resources and strengthening control over fiscal spending, bank lending, and state investment funds. This ensures that scarce resources are directed toward strategic priorities.
Global Trade Impact
The implications for global trade are profound. China’s expanding industrial policy threatens to deepen the reliance of other economies on Chinese supply chains, particularly in critical sectors such as semiconductors, rare earths, and advanced materials. The report highlights that China already holds dominant positions in several upstream segments, and policymakers are now seeking to extend this across a broader range of industrial products.For exporters and importers, this means increased exposure to Chinese market dynamics and potential supply disruptions. For multinational corporations, the competitive pressure from Chinese firms backed by state support is intensifying. The report warns that foreign companies may find themselves crowded out of domestic Chinese markets as local firms gain technological capabilities. Moreover, the rapid global expansion of Chinese firms, often supported by state financing, is reshaping competitive dynamics in third-country markets.
The report also suggests that China’s industrial policy is a direct challenge to foreign diversification efforts. As Western economies push for nearshoring and friendshoring, Beijing is using its policy tools to counter these strategies, entrenching its position in global value chains.
Strategic Insights
For businesses, the key takeaway is that China’s industrial policy is no longer just about import substitution; it is about global market dominance. Companies need to assess their supply chain dependencies on Chinese inputs and develop contingency plans. The report advises that the window for effective action is finite, as the competitive landscape is becoming increasingly entrenched.Investment implications are significant. Foreign direct investment into China is facing new barriers as state intervention favors domestic champions. At the same time, Chinese outward investment is growing, particularly in sectors aligned with national strategic priorities. Investors should monitor policy developments closely, as government guidance funds and state-backed investment vehicles are being consolidated and aligned more closely with national objectives.
Trade policy makers in the United States, Europe, and other major economies need to recognize that China’s industrial policy is not static. The report’s findings echo earlier warnings from the U.S. Chamber of Commerce, which in 2017 described MIC25 as "a decisive shift away from market-oriented reform toward state-directed economic outcomes." The trajectory has been consistent, and the response from Western economies has been insufficient.
Future Outlook
Looking ahead to the next 3–5 years, China’s next-generation industrial policy will continue to shape global trade and manufacturing. The report expects that Beijing will maintain its support for mature sectors while pushing into frontier technologies, particularly artificial intelligence. AI has emerged as a central pillar of China’s industrial strategy, with the government mobilizing the entire economic system to gain a foothold in future industries.Demand creation will become an increasingly important tool. The report notes that new technologies are no longer treated solely as areas for R&D and innovation; they are now also supported with public procurement and state-owned enterprise adoption at scale. This will accelerate the commercialization of cutting-edge technologies, making Chinese firms formidable competitors in AI, quantum, and future energy systems.
For global supply chains, the trend toward "de-risking" and diversification will face strong headwinds from Chinese policy responses. Beijing is likely to continue using export controls, market access restrictions, and state-backed competition to counter foreign strategies. The report warns that foreign dependencies on Chinese supply chains will deepen unless decisive action is taken.