Eurasia Biz Monitor
Deep Dive

China's Next-Generation Industrial Policy: Strategic Implications for Eurasia

An analytical look at how China's shift from targeted sectoral interventions to a systemic industrial policy across all layers of production is reshaping Eurasian trade, supply chains, and investment dynamics.

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Editorial Board

Published on August 2, 2026

Subheadline: How Beijing's expanding state intervention across industries is redefining trade and investment across the Eurasian landmass

Executive Summary

China's industrial strategy has evolved from the targeted sectoral ambitions of Made in China 2025 into a more comprehensive and expansive framework. The current policy direction can be characterized as an "industrial policy of everything," extending across mature sectors, foundational supply chain nodes, and frontier technologies. This shift is accelerating China's trade dominance, deepening foreign dependencies on Chinese supply chains, and facilitating the global expansion of Chinese firms. For Eurasia, these developments bring both opportunities and challenges. Economies in Central Asia, the Caucasus, and Eastern Europe are increasingly integrated into Chinese-led production networks, while the European Union faces competitive pressures in advanced manufacturing. Understanding the trajectory of China's industrial policy is essential for businesses, investors, and policymakers across the region.

Introduction

A decade after the launch of Made in China 2025 (MIC25), China is redefining its approach to state-led economic development. The earlier phase concentrated on specific strategic emerging industries, such as new energy vehicles, aerospace, and information technology. The new generation of industrial policy is far more ambitious, touching almost every major sector and their underlying supply chains. This expansion is occurring under tighter domestic constraints—slower growth, weak consumption, and rising fiscal pressures—yet Beijing is doubling down rather than retreating. For Eurasia, a region deeply intertwined with China through trade corridors, infrastructure projects, and investment flows, the implications are significant and multifaceted.

Main Analysis

#### From targeted sectors to systemic coverage China's next-generation industrial policy moves beyond the sector-specific approach of MIC25. It now encompasses upstream raw materials, intermediate goods, manufacturing equipment, downstream services, and future technologies. In critical minerals, wafers, and magnets, China already holds dominant global positions, and policymakers are extending this success to other industrial products. Even in mature sectors facing overcapacity, such as steel and solar panels, the state is not merely cutting capacity but pushing firms to upgrade to higher-value segments and adopt advanced production technologies to gain market share.

#### The pivot to frontier technologies and demand creation
Artificial intelligence has emerged as a central pillar of the new policy framework. Unlike earlier phases that focused on R&D, current strategies include state-led demand creation through public procurement and state-owned enterprises, pushing new technologies into rapid commercial deployment. Quantum computing, future energy systems, and biotechnology are also prioritised, with resources consolidated through guidance funds and targeted lending facilities. This systemic approach aims to position China as a leader in the next wave of global technological competition.

#### Domestic constraints and policy adaptation
China's industrial ambitions are unfolding amid a more challenging macroeconomic landscape. Weak domestic demand, overcapacity in several industries, and declining efficiency of capital allocation prompt authorities to centralise control over financial resources. Fiscal spending, bank lending, capital markets, and state investment funds are increasingly coordinated to ensure that scarce resources are directed to strategic priorities. This recentralisation is a pragmatic response to constraints, but it also intensifies state influence over economic outcomes.

#### Global and Eurasian spillovers
As Chinese firms expand capacity and lower costs, they are capturing larger shares of global markets, including in Eurasia. The report referenced in this analysis notes that these dynamics expand foreign dependence on Chinese supply chains and accelerate China's trade dominance. For Eurasian economies, this means both increased import reliance for industrial inputs and new export opportunities in natural resources and agricultural goods to China. However, it also raises concerns about technological dependency and the crowding out of domestic industry.

Business Impact

For multinational corporations and local firms across Eurasia, China's industrial policy evolution has several concrete implications:
  • Competitive pressure: Eurasian manufacturers, particularly in the European Union and Türkiye, face stiffer competition from Chinese producers in sectors like electric vehicles, electronics, and machinery. The scale of state support gives Chinese firms cost advantages that are difficult to match.
  • Supply chain integration: Businesses in Central Asia and the Caucasus are becoming deeply integrated into Chinese production networks, often as suppliers of raw materials or as transit economies along logistics corridors. This creates opportunities for infrastructure development but also increases dependency on Chinese demand.
  • Investment dynamics: Chinese foreign direct investment in Eurasia is likely to grow, focused on ports, railways, industrial parks, and digital infrastructure—all aligned with Beijing's industrial strategy and the Belt and Road Initiative. Investors should monitor how Chinese state-backed funds prioritise projects that advance its industrial objectives.
  • Technology adoption: Chinese digital and AI technologies may become more widely deployed in Eurasian markets, especially in regions where Chinese firms are leading infrastructure projects. This can bring efficiency gains but also raises data governance and security concerns.

Regional Perspective

The implications vary across Eurasian sub-regions:
  • European Union: The EU faces direct competition in advanced manufacturing and must respond with strategic industrial policies of its own, including investments in clean tech, semiconductors, and digital infrastructure. At the same time, the EU's green transition and critical minerals needs create dependencies on Chinese supply chains, necessitating diversification strategies.
  • Central Asia: Countries like Kazakhstan, Uzbekistan, and the Kyrgyz Republic are pivotal to China's overland trade routes. They benefit from infrastructure investment and improved connectivity, but also risk becoming more dependent on China as a market and source of credit. Their manufacturing sectors may struggle to compete with Chinese imports.
  • Caucasus and Türkiye: These economies act as bridges between Asia and Europe, and they are leveraging their geographic position to attract Chinese investment in logistics and energy infrastructure. However, they must balance these ties with existing economic partnerships with the EU and Russia.
  • Eastern Europe and the Western Balkans: As EU candidate countries or peripheral EU members, they are caught between Chinese investment in infrastructure and EU norms on state aid and competitive neutrality. Their access to EU markets provides leverage, but they must navigate complex geopolitical pressures.

Future Outlook

Over the next 3–5 years, China's industrial policy is likely to become even more expansive. Key trends to watch include:
  • Deepening regional integration: The Middle Corridor and other Eurasia-wide trade routes will expand, supported by Chinese investment and policy alignment with countries along the routes. This will facilitate faster freight transit and economic integration but also increase China's influence over trade flows.
  • Rising technology leverage: Chinese AI and digital infrastructure will be deployed more widely across Eurasia, with potential for technological lock-in and standard-setting. Governments will need to develop robust data governance frameworks.
  • Energy transition and critical minerals: China's industrial policy will drive demand for critical minerals from Central Asia and the Caucasus, creating investment booms in mining and refining. At the same time, Eurasia's energy exporters may see shifting demand patterns as China accelerates its clean energy transition.
  • Industrial policy responses: Eurasian governments will likely craft their own industrial strategies to strengthen competitiveness and reduce dependencies. The EU, in particular, will expand its state-aid frameworks and investment programs to counterbalance Chinese influence.
  • Supply chain reconfiguration: Trade tensions between China and the West will continue, pushing multinationals to diversify. Eurasia offers alternative production locations, especially in Central and Eastern Europe, which could attract investments from both Chinese and Western firms.

Conclusion

China's next-generation industrial policy is not merely a domestic economic plan; it is a systemic force reshaping global production and trade. For Eurasia, the region stands both as a crucial corridor and a periphery deeply affected by these shifts. Leaders and businesses that understand the trajectory and adapt strategically will find opportunities in infrastructure, trade, and industrial upgrading. Those that fail to anticipate the consequences may face increased dependence and marginalisation. The next five years will be pivotal for Eurasian economies to define their position in a world evolving under the influence of Beijing's industrial ambitions.

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