China’s Industrial Policy 3.0: New Tools and Broader Intervention

China is fully committed to industrial and technology policy. The policy motives of security and self-reliance received even greater emphasis as the US-China trade war reached its peak between April and October 2025, and a major mobilization of resources is being sustained. New policy instruments and new forms of direct government intervention have been rolled out steadily in recent months. The number of industrial sectors designated for policy support remains exceptionally high. These features define a new phenomenon I label China Industrial Policy 3.0 (China IP 3.0). The costs of this substantial industrial policy effort are likely high, particularly when we include the indirect macroeconomic and institutional costs along with direct costs. However, China shows no sign of wavering from its commitment to technological competition with the United States, and if anything, we may observe China doubling down as we enter 2026. Barry Naughton is one of the world's premier China scholars, and has published numerous treatises on Chinese industry, trade, finance, and the country's transition to a market economy. His recent research focuses on regional economic growth in China and its relationship to foreign trade and investment. He has addressed economic reform in Chinese cities, trade and trade disputes between China and the United States and economic interactions among China, Taiwan and Hong Kong. Naughton is the author of The Chinese Economy: Transitions and Growth, a widely-used textbook on the Chinese economy, which has been translated into Chinese. His work Growing Out of the Plan: Chinese Economic Reform, 1978-1993 received the Ohira Memorial Prize, and he most recently translated, edited and annotated a collection of articles by the well-known Chinese economist Wu Jinglian. Naughton writes a quarterly analysis of the Chinese economy for China Leadership Monitor.