The authors examine how China’s techno-industrial policy has evolved under Xi Jinping into a more centralized, security-linked, and finance-driven system. They explain how this system operates in practice by organizing Xi-era policy into five channels 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.

China’s Techno-Industrial Strategy in the Xi Era

Producing Under Pressure

Gerard DiPippo, Jonathon Sine, Benjamin Lenain

ResearchPublished Jun 11, 2026

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.

Key Takeaways

Fiscal constraints are reshaping the policy toolkit

  • After roughly 2021–2022, tighter local budgets reduced room for discretionary subsidies and other outlays.
  • Beijing intends to keep fiscal deficits roughly steady as a share of gross domestic product while sustaining industrial policy support by curbing wasteful local incentives.

The Party-state is shifting from direct spending toward mandates

  • The Party-state increasingly acts as an investor and coordinator through guidance funds, targeted credit, tax incentives, procurement mandates, and capital-market reforms.
  • The effect is to spread the costs of industrial policy across firms and institutions rather than bear them on the public budget.

The “investor state” faces structural limits

  • Government guidance fund commitments have grown dramatically since 2014, but corruption, short-termism, and geographic restrictions have exposed serious weaknesses in the local fund model.

Party-state corporate control has deepened

  • State-owned enterprises remain preferred instruments in upstream and security-sensitive sectors, while private firms are steered through regulation, Party embedding, minority state stakes, and champion-designation programs.

The external dimension is explicitly techno-industrial

  • The Belt and Road Initiative creates external demand for Chinese technology, locks in Chinese equipment and standards in partner markets, and aligns outbound investment with domestic industrial priorities.

China’s techno-industrial strategy is generating structural global friction

  • Depreciation of China’s real effective exchange rate since 2021, driven by comparatively weak domestic inflation, has compounded the competitive advantages generated by industrial policy and scale.
  • If manufacturing output continues to outpace domestic demand, the surplus must be absorbed abroad, inviting growing resistance through tariffs, industrial policy responses, and trade remedies.

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DiPippo, Gerard, Jonathon Sine, and Benjamin Lenain, China’s Techno-Industrial Strategy in the Xi Era: Producing Under Pressure. Santa Monica, CA: RAND Corporation, 2026. https://www.rand.org/pubs/research_reports/RRA4012-1.html.
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This effort was independently initiated and conducted within the China Research Center within RAND Global and Emerging Risks using a gift from philanthropist Michael Tang, as well as gifts from other RAND supporters and income from operations.

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