Following Pause in Trade Talks With the U.S., China Reportedly Prepares New Industrial Policy

After a decade of accelerated industrialization, China is preparing to go for another round. On May 26, Bloomberg reported that Chinese paramount leader Xi Jinping is currently considering relaunching an updated version of “Made in China 2025” (MIC2025) — one of the country’s premier industrial policies.

The proposal comes as Beijing seeks to accelerate the contribution of the country’s manufacturing sector to its economic security and military prowess — while signaling a lack of interest in significant concessions in ongoing trade negotiations with the United States.

Xi Reportedly Interested in Extending ‘Made in China 2025’ Ahead of Next Five-Year Plan

The planned revamping of the “Made in China 2025” campaign — which prioritized increasing China’s self-sufficiency across a variety of high-value manufacturing sectors — comes as Beijing prepares the next iteration of its Five-Year Plan, its master policymaking document. According to Bloomberg, both plans will emphasize strengthening China’s manufacturing sector, particularly upgrading the country’s chipmaking industry, over the medium to long term while limiting further attempts to spur domestic consumption as a share of gross domestic product.

The reported preparations follow Xi’s recent support for China’s manufacturing and high-tech sectors. During its most recent budgetary cycle, Beijing increased spending on scientific research and higher education, while Xi called for local officials to “seize on scientific and technological innovations.” On a tour of Henan Province last week, Xi highlighted the importance of manufacturing, urging efforts to improve collaboration between industries and universities to “master core technologies in key fields” — a reference to Beijing’s desire to dominate high-value export markets and accelerate its military modernization efforts.

Beijing Prioritizes Structural Economic Imbalance to Pursue Global Ambitions

Beijing’s interest in extending MIC2025 is largely due to its success in transitioning China’s economy toward high-value manufacturing and promoting self-sufficiency despite its overall costs to the country’s macroeconomic stability. Having benefited from a flood of subsidies, Chinese firms have reduced their reliance on key imports — such as medical devices — while driving up the country’s trade surplus and enhancing industries critical to its defense industrial base. Nonetheless, these efforts have come at the cost of the country’s overall economic health, including a sustained lack of productivity growth due to ineffective subsidies and an entrenched deflationary spiral due to overproduction and a lack of consumer confidence.

The proposal will also likely harm ongoing U.S.-China trade negotiations. In announcing the temporary mutual rescission of tariffs on May 12, the White House outlined the establishment of a mechanism to address imbalances between the U.S. and Chinese economies — a trend that has been heightened by Beijing’s industrial policy. In an interview with CNBC shortly after the announcement, U.S. Treasury Secretary Scott Bessent called for Washington and Beijing to “rebalance together,” saying that the United States needs “more manufacturing,” while China needs “more consumption.”  

Washington Should Use Tariff Pause to Strengthen Its Leverage

The United States should use the temporary pause in tariffs to strengthen its leverage in negotiating with China — whose economy remains highly vulnerable to American tariffs. Using a combination of export controls and outbound investment screening mechanisms, both Congress and the executive branch can ensure that American technology and finance cannot flow to China’s manufacturing sector.  

Along with stymieing China’s rise, Washington should also do more to secure its own scientific and technology leadership for the long term. Along with reversing cuts to the National Science Foundation, the National Institutes of Health, and the National Institute of Standards and Technology — all of which contribute to American innovation — Congress should consider additional funding for both basic and applied research.

Jack Burnham is a research analyst in the China Program at the Foundation for Defense of Democracies (FDD). For more analysis from Jack and FDD, please subscribe HERE. Follow Jack on X @JackBurnham802. Follow FDD on X @FDD. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.