Chen Guoxiang's Perspective: State-Led Strategic Industrial Policy — The End of the 'Hyper-Globalization' Era

Since the second decade of the 21st century, the field of global economic policy has been undergoing a profound paradigm shift. This transformation integrates national strategic intent, geopolitical security thinking, and forward-looking industrial upgrading goals into a composite model of economic governance. Viewed along the ideological spectrum, this converging trend represents a strong global resurgence—not of traditional left-wing welfare-state models, but of conservative economic governance philosophies characterized by national strategic direction, security-first thinking, and industrial protectionism.

This resurgence is no accident. It is a systematic response to the structural contradictions accumulated over more than three decades of post–Cold War neoliberal globalization, as well as to recent recurring geopolitical shocks, public health crises, and technological revolutions. This combination of policy measures reflects a growing consensus among major economies after financial crises, pandemic disruptions, and geopolitical confrontations: the marginal effectiveness of relying solely on monetary policy has sharply declined, and fiscal policy must return to the core of macroeconomic regulation. Moreover, fiscal expansion must be closely aligned with national strategic objectives.

From a macro perspective, a clear common trend emerges in the policy directions of major global economies: the government’s “visible hand” is re-expanding its functional boundaries in economic life. However, the logic behind this intervention is not the traditional left-wing welfare-state model, but rather a conservative economic governance philosophy marked by strong national strategic orientation, security-first priorities, and industrial protectionism.

The United States’ policy shift is particularly evident and globally influential. From the Trump administration’s launch of the China tariff war, high-profile push for manufacturing repatriation, and renegotiation of the North American Free Trade Agreement, to the Biden administration’s tenure—despite markedly different political rhetoric—the economic policy trajectory has not reversed. Instead, it has been institutionalized and long-termized in a more systematic way. The Biden administration successively passed the Infrastructure Investment and Jobs Act, the CHIPS and Science Act, and the Inflation Reduction Act.

The core of these acts is unprecedented-scale and high-intensity direct federal government intervention in critical industrial sectors such as semiconductor manufacturing, clean energy technologies, and electric vehicle supply chains, providing massive fiscal subsidies, tax credits, and R&D support. The passage of these bills marks America’s definitive departure from the Washington Consensus it once vigorously promoted worldwide, entering a new era of state-led, strategically competitive industrial policy.

Mainland Europe is following a similar trajectory. Germany and France, as the twin engines of the European Union, are actively promoting energy transition (aimed at reducing dependence on Russian fossil fuels) and the reshoring or “nearshoring” of key manufacturing industries such as pharmaceuticals, semiconductors, and new-energy vehicles. At the EU level, the concept of “strategic autonomy” has been systematically proposed, aiming to reduce reliance—especially on China—in critical areas such as defense security, digital economy, and supply chain resilience, and to establish a European-controlled capability system. EU regulations such as the Foreign Subsidies Regulation and the Digital Markets Act are essentially designed to erect protective barriers around its internal market.

In East Asia, South Korea and Taiwan have long adopted industry-oriented development models, advancing continuous upgrades in high-tech industries such as semiconductors, displays, and precision manufacturing through industrial planning, policy guidance, and close collaboration with large corporate groups. In recent years, this model has been further strengthened in response to the challenges of global supply chain restructuring. Mainland China, meanwhile, employs a unique form of state capitalism, making massive strategic investments in frontier fields such as semiconductors, artificial intelligence, new energy, and quantum computing under its “Made in China 2025” strategy.

Although these economies differ significantly in political systems, market maturity, and specific policy tools, their core philosophies are converging as never before: in an era where global competition increasingly manifests as technological rivalry and competition for supply chain dominance, nations must proactively deploy various policy instruments to shape their industrial structures and future technological competitiveness.

Thus, the era of state-led strategic industrial policy places greater emphasis on deeply reshaping the supply side of the economy, rather than merely maintaining a laissez-faire market environment. Governments are no longer content to regulate aggregate demand through monetary policy alone; they are becoming more directly involved in industrial regional planning, R&D investment in key technologies, and the setting of future industrial standards. The meaning of fiscal expansion has also changed. It is no longer about universally expanding welfare spending across the entire population, but emphasizes “strategic expansion”—that is, concentrating limited fiscal resources on domains critical to national security and future competitiveness, such as advanced manufacturing, defense technology, cybersecurity, clean energy, and basic scientific research infrastructure, rather than sustaining an ever-expanding, high-cost social welfare system. This “concentrate strength to accomplish great tasks” approach is a typical feature of conservative economics in practice.

The digital technology revolution, represented by artificial intelligence, is a key driving force behind the resurgence of state-led strategic industrial policy. The rapid advancement of AI is fundamentally redefining the boundaries of production efficiency, labor market structures, and business models of industrial competition. Its immense technological spillover effects and potential to transform countless industries make it a strategic high ground that every nation seeks to control. Under these circumstances, any country aspiring to remain competitive in the future global arena must invest substantial public resources in supporting foundational research on core algorithms, constructing ultra-large-scale computing infrastructure, and cultivating top-tier talent in mathematics, computer science, and related fields.

These policies collectively point to a new reality: the driving mechanism of economic globalization is reversing—from the past market logic of purely pursuing optimal efficiency, toward a strategic logic that values both efficiency and security, and in certain domains, prioritizes security. Nations no longer unconditionally pursue fully open global markets; instead, they strive to build a system of “prosperity within secure boundaries”—one that is sustainable and resilient against external shocks—within their own strategic borders. Fiscal policy will thus undergo a historic transformation, shifting from a traditional demand-management tool aimed at smoothing economic fluctuations to a strategic investment engine serving long-term national goals. Public spending will increasingly concentrate on strategically significant areas: repairing and building modern infrastructure, investing in basic science and breaking through technological “bottlenecks,” and strengthening industrial systems related to national security. Correspondingly, the existing model of globalization will undergo profound structural reconstruction. The era of “hyper-globalization,” defined by a single global market and unified rule systems, is coming to an end.

*Author is a senior media professional.

This article is part of the series "The Economic Chessboard Under the New Cold War."