Re-engineering the Innovation Chain: How a New Phase of Government Intervention is Transforming China’s Industrial Economy

Since 2020, China has dramatically increased the ambition, scope, and resources of its technology and industrial policy. The government has also expanded direct intervention in the economy, creating new organizational forms in order to link researchers, technology providers, and firms. This program aims to re-engineer the innovation chain—and with it, the entire industrial economy. In this policy brief, Barry Naughton, Sokwanlok Chair of Chinese International Affairs at the School of Global Policy and Strategy at UC San Diego, analyzes the implications of these dramatic interventions. He argues that China’s program is weakly planned, scattershot, and incremental; highly protectionist in nature; and driven by security concerns. The economic impact of these moves, Naughton says, will almost certainly be negative—for China and for the world.