China is said to have taken a strong interest in industrial policy since it launched the “reform and opening-up” policy in 1978. Since then, while acknowledging the role of the market, the Chinese government has maintained a state-guided approach to industrial development.
China’s industrial policy attracted greater international attention when the government announced the “Made in China” strategy in 2015. Having established itself as the “world’s factory,” China has shifted its focus toward reducing its dependence on foreign technology and strengthening its capacity for technological innovation. China has emerged as a global manufacturing powerhouse in priority sectors such as robotics and aerospace.
A distinctive feature of China’s industrial policy is its combination of large-scale subsidies and lending with active measures to expand market demand, as illustrated by its support for electric vehicles (EVs). These policies have promoted specialization among firms and industrial clustering, fostering technological upgrading, innovation, and industrial dynamism.
However, these policies have also had adverse effects. For example, the entry of large numbers of companies into targeted industries has intensified competition and contributed to excess production capacity, putting downward pressure on prices.
China’s policies are also affecting other countries around the world. Research by Professor David Autor of the Massachusetts Institute of Technology (MIT) finds that a rapid increase in imports of low-priced Chinese manufactured goods led to substantial job losses in U.S. manufacturing, with the effects concentrated in regions heavily dependent on industries competing with Chinese imports.
China has also become a major target of trade remedy measures imposed under World Trade Organization (WTO) rules. For example, the European Union (EU) imposed countervailing duties on Chinese EVs deemed to have unfairly benefited from subsidies. Separately, the United States sharply increased tariffs under Section 301 of its trade legislation.
The WTO permits countries to impose countervailing duties when subsidized imports cause injury to domestic industries. However, these rules do not adequately address the adverse effects of cost advantages arising from subsidy-supported capacity expansion. As a result, China’s industrial policy has sparked renewed debate over international trade rules.
>> Original text in Japanese
* Translated by RIETI.
August 5, 2026 - Published in Nihon Keizai Shimbun's " Introduction to Economics—New Trend in Industrial Policy "
