Understanding the Changes in the Global Industrial Landscape

As the profound changes unseen in a century accelerate and the world economy undergoes deep restructuring, the global industrial landscape is being systemically reshaped. Within this process, the unilateral and protectionist policies pursued by the United States and other countries have heightened uncertainty within the global economic and trade system, compelling many countries to reassess and recalibrate their industrial layout. One after another, countries have pushed for reshoring to shield against external risks. In particular, strategic competition among major economies over emerging industries, such as semiconductors and artificial intelligence (AI), is becoming increasingly intense.

I

The ongoing restructuring of the industrial landscape is by no means a piecemeal adjustment; rather, it is a multidimensional transformation encompassing spatial layout, value architecture, technological iteration, and organizational models. In essence, it represents a realignment of the division of labor under economic globalization. This restructuring is unfolding along four distinct dimensions.

Spatial shift: from global integration to regionalization and a “1+N” multi-hub model

The traditional global production network, built on the logic of “locating wherever costs are lowest,” has had its vulnerabilities laid bare by escalating geopolitical conflicts and sudden supply chain disruptions. In response, some countries have pushed so-called “de-risking” strategies and aggressively pursued “nearshoring” and “friend-shoring,” adopting an industrial layout strategy based on a “1+N” multi-hub model, in which enterprises retain one primary production base while establishing multiple backup or complementary bases in other regions to diversify risks and enhance supply chain resilience. This shift is clearly reflected in trade data. Between 2017 and 2024, China’s share of U.S. imports fell from 21.6% to 13.4%. Over the same period, the shares of Mexico and Vietnam increased by more than 2 percentage points, rising from 12.3% to 14.4% and from 2.1% to 4.3%, respectively, highlighting a clear trend toward regionalization and nearshoring. Multinational corporations are acting on the same logic. Of the world’s top 20 power battery manufacturers by installed capacity, 14 have established multiple production bases across Europe, North America, and Southeast Asia. Similarly, automakers are investing in plants in resource-rich countries like Chile and Australia to secure supplies of critical raw materials. This multi-hub strategy has significantly increased the complexity of global production networks.

Structural shift: from traditional manufacturing-driven growth to services and green development amid increasing industrial homogenization

The drivers of global industrial value creation, along with countries’ competitive advantages, are undergoing a profound transformation. On the one hand, services and green industries have emerged as the core engines of value enhancement. The linear division of labor centered on traditional manufacturing is being dismantled, as high value-added producer services, including R&D, design, software, supply chain management, and after-sales operations and maintenance, have become deeply embedded in and now dominate the entire industrial value chain. At the same time, the response to climate change has evolved from an external constraint into a powerful internal driver, spawning a vast green industry ecosystem. As an example, consider China’s “new trio,” namely, new energy vehicles, lithium-ion batteries, and photovoltaic products. Their combined export value surged from 284.4 billion yuan in 2020 to 1.28 trillion yuan in 2025. This 3.5-fold increase over five years has turned these products into a pivotal force leading the global green transition. On the other hand, the global industrial competitive landscape is increasingly characterized by both homogenized competition and systemic rivalry. As the United States and Europe vigorously pursue “re-industrialization” and manufacturing reshoring, increasingly homogenized competition has emerged in industrial chains across major economic blocs. By virtue of its unique advantage as the only country possessing all industrial categories listed in the International Standard Industrial Classification of All Economic Activities (ISIC), China has built a globally unmatched, highly integrated, and responsive industrial support network. This “one-stop” comprehensive industrial ecosystem demonstrates a systemic competitiveness that is difficult to replicate.

Technological shift: from unipolar spillover to multipolar innovation

From a spatial perspective, technological innovation is shifting from geographical concentration toward broader diffusion, giving rise to a new landscape of multipolar breakthroughs, where changes in the technological iteration pathways and competitive dynamics are reshaping the logic of global industrial competition. In terms of the distribution of innovation, a multipolar pattern has already taken shape: The United States dominates AI infrastructure and high-end semiconductor manufacturing; the European Union (EU) leads in green technology and industrial software; Japan and South Korea excel in precision manufacturing and advanced materials; and China holds a comparative edge in sectors such as 5G communications, new energy batteries, and AI applications. In terms of competitive dynamics, U.S. and European technological containment efforts have escalated from targeted blockades against individual enterprises to an interconnected network of restrictions covering cutting-edge basic research, key generic technologies, and high-end manufacturing processes. Their aim is to erect all-encompassing technological barriers that cut off the channels for technological iteration and dissemination across regions. By fracturing the traditional models of technological diffusion, such technological blockades have forced other countries to abandon the path of “technology import and imitation-based innovation” and instead invest substantial financial and human resources in independent R&D.

A visitor views driver-assistance chips on display at the third China International Supply Chain Expo, July 19, 2025. The expo was held in Beijing from July 16 to 20. PHOTO BY XINHUA REPORTER JU HUANZONG

Organizational shift: from market primacy to state intervention and the reshaping of rules

The organizational forms and rule systems of global industry are simultaneously undergoing profound transformations. These shifts are characterized by deep involvement of state power and regulatory barriers, which have reinforced each other to jointly reshape the logic of the global division of labor. At the organizational level, the role of state power has been strengthened to an unprecedented degree. While multinational corporations remain key players, their global footprints are increasingly being shaped by the industrial policies and geopolitical strategies of their home countries. The United States and European countries are directly intervening in global industrial layout with the use of massive subsidies, legislative restrictions, and long-arm jurisdiction. This is driving the formation of a model of competition among industrial ecosystems led by dominant firms and underpinned by national strategies. At the rule-setting level, the traditional multilateral framework centering on the World Trade Organization (WTO) has been steadily eroded, as differentiated and exclusive rule systems are established at an accelerating pace. Regional trade agreements have now become the primary vehicle for setting rules. By the end of 2024, the number of such agreements worldwide had reached 378, an increase of 102 since 2010. Most of these contain specific provisions on key sectors such as semiconductors and new energy. They also embed values and environmental standards into trade rules through non-tariff barriers such as carbon border taxes, digital agreements, and traceability requirements, fragmenting global collaboration and undermining its efficiency. The co-evolution of organizational structures and regulatory frameworks indicates that global industrial competition has escalated into a contest between state-led ecosystems and regulatory frameworks. In essence, this is a comprehensive rivalry among nations over institutional advantages, resource mobilization capabilities, and rule-making authority.

II

The aforementioned systemic transformation of the global industrial landscape is no accident. Rather, it is the product of the shifting international balance of power, the evolution of productive forces, and the deepening of capitalism’s inherent contradictions.

The fundamental contradiction of capitalism has found concentrated expression and undergone phased intensification in the process of economic globalization

Over the past 30 years, economic globalization, driven by multinational capital, has optimized the global allocation of production factors and propelled economic growth worldwide. However, it has also aggravated imbalances in the international division of labor. Industrial hollowing out has intensified in developed countries, with the share of manufacturing employment in steady decline. The United States saw its manufacturing employment share drop from 12.7% in 2000 to 8% in 2025, the lowest level in two decades. When gains in economic efficiency can no longer mask structural imbalances, conflicting social interests, and other deep-seated problems, populist forces pin the blame for domestic industrial decline on the “inequities of economic globalization.”

Consequently, pushing for manufacturing reshoring and building “small yards with high fences” have become the policies of choice for certain countries seeking to shift domestic problems outward and pursue self-serving political gains. Far from a mere short-term tactic, this policy shift represents a phased self-adjustment of the capitalist system itself. The laws of history dictate that every surge in economic globalization is followed by phased backlash and recalibration. The current shift in the global industrial landscape from dispersion to agglomeration and from free markets to state intervention is precisely the latest expression of this law.

Leaps in productive forces and disparities in coordination efficiency are driving the restructuring of global industry

The advent of new technologies has rendered traditional industrial development models increasingly untenable, while opening up new opportunities for emerging industries. This has led to a reordering of countries’ industrial strengths and shattered the old logic that early developers will always lead the way.

The widespread adoption of digital technology has blurred the boundaries between manufacturing and services, establishing data, algorithms, and knowledge as core factors of production and giving rise to new business forms such as Product-as-a-Service (PaaS) and personalized customization. No longer confined to traditional manufacturing, industrial development now extends across the entire value chain—from R&D to services and operations—dramatically increasing the added value of industry. Furthermore, the advancement and industrialization of green technology have translated the global consensus on addressing climate change into commercially viable technological pathways and market mechanisms, making “green” both a new cost element and a marker of value. Together, digital and green technologies are driving a structural shift in global industry away from a manufacturing-led model to one characterized by services and green development.

In the meantime, the United States and European countries must contend with high coordination costs as they face regulatory differences and divergent interests in pursuing an alliance-based industrial layout. China, by contrast, organizes its industries within a unified national market governed by a single set of rules and unhindered by cross-border barriers, allowing for a high level of industrial coordination. This gives China a systemic advantage that is difficult to replicate as global industries become increasingly homogeneous and competition intensifies. Disparities in coordination efficiency, arising from differences in market scale, institutional environment, and organizational efficiency, are not only a key driving force behind global industrial restructuring, but also a direct contributor to the accelerating shifts in relevant countries’ positions in global industrial chains, thus fueling a profound reshaping of the global industrial landscape and division of labor.

Multipolar competition in industrial technologies has been intensified by technological transformation and containment

Technological supremacy is no longer merely a source of economic advantage, but the very foundation of national security and geopolitical power. Based on the underlying logic of the evolution of productive forces, breakthroughs in new technologies like AI have shattered the path dependence of traditional technological innovation. As a result, the threshold for innovation has been markedly lowered, making it no longer the exclusive domain of a few developed countries with deep technological reserves. From the perspective of technological rivalry, containment measures such as interconnected blockades have forcibly severed the traditional path by which latecomer countries acquired foreign technology and pursued imitation-based re-innovation, compelling them to turn instead to basic research and original innovation. It turns out that no single country is able to monopolize all cutting-edge technologies. Each country can only play to its own strength, drawing on its resource endowments, market characteristics, and accumulated expertise to build its own innovation hubs in specific fields. This dynamic is driving the redrawing of the global industrial landscape.

State intervention and maneuvering over rules have become a core means for safeguarding industrial interests

As global industrial competition intensifies, relying on market forces alone can no longer guarantee industrial security or consolidate industrial strengths. State intervention and rule-making have thus become an inevitable choice for all countries. First, externalities have become increasingly prominent in industrial development. For instance, areas such as climate change, breakthroughs in core technologies, and supply chain resilience entail large-scale investment, long payback periods, and high risks. Focused on short-term returns, private capital is unwilling to commit substantial resources to such areas. States must, therefore, intervene through industrial policies and strategic investment to address the gap created by private capital’s short-termism. As a result, industrial governance has shifted from being market-led to being driven by both national strategies and market mechanisms. Second, as latecomer countries close in on the technological frontier through the established regulatory system, the traditional dominant powers have shifted the focus of competition from market efficiency to a contest for rule-making authority, in an effort to defend their advantages. By embedding non-traditional issues such as values, labor standards, and carbon accounting into economic and trade rules, they “codify” and “legitimize” their advantages in a given phase, erecting discriminatory barriers in the process. Their underlying aim is to lock global economic competition into a framework of rules they dominate, so as to preserve incumbent advantages and slow the erosion of their position as the balance of power shifts.

III

In the face of the profound transformation of the global industrial landscape, China must adhere to systems thinking, coordinate development and security, and chart a path of proactive adaptation that bolsters resilience, upgrades capabilities, and spearheads cooperation.

We should foster a growth model that ensures unimpeded domestic and international economic flows and enhance the security and resilience of our industries

In response to the trend of global industrial layouts shifting toward regional concentration and reactive diversification, China should build itself into an indispensable hub for organizing supply chains within the global industrial landscape and ensure highly efficient synergy between domestic and international industrial flows. Domestically, with a focus on building a unified national market, we should leverage the strengths of China’s enormous market to gather high-end production factors from around the world, upgrade key national-level industrial clusters, and strengthen industrial support capabilities and coordination efficiency, so as to hedge against the risk of overseas industrial contraction. Externally, we should pursue a strategy for resilient global engagement by building a support system for overseas industrial investment and supporting Chinese companies in developing industrial cooperation zones in BRI partner countries and in nations rich in critical minerals. We must build a diversified resource supply network, break through the blockade imposed by Western “mineral alliances,” and develop independent, controllable cross-border industrial flows, thus reducing exposure to external risks.

We should accelerate the development of new quality productive forces to optimize and upgrade the industrial structure

Driven by new quality productive forces, we will forge new quality advantages and sharpen the competitiveness of our industrial structure to seize the initiative in global industrial competition. We should integrate producer services through the entire chain, from R&D and manufacturing to operations and maintenance, in order to increase added value. Efforts should also be made to expand green exports with a focus on the “new trio,” while expediting the low-carbon transformation of traditional industries. By leveraging the strengths of China’s complete industrial system, we should continue to foster differentiated competitive advantages in high-end manufacturing and optimize our trade structure. In addition, regional cooperation mechanisms should be harnessed to diversify our markets, thus mitigating the pressures of trade protectionism.

We should pursue non-linear breakthroughs to strengthen our technological edge in key industries

Focusing on both basic and original innovation, we must fully leverage the advantages of the new nationwide mobilization system. This includes setting up exploratory research funds for future industries facing technological bottlenecks, supporting universities, research institutes, and enterprises in forming innovation consortia, and achieving breakthroughs in core technologies like chip design tools, thereby overcoming technological barriers. To consolidate our edge in technological applications, we should, building on the world’s largest information and communication network, further expand application scenarios in 5G, new energy batteries, and other fields in an effort to create a virtuous cycle of application, iteration, and innovation. Furthermore, we should strive for a greater say in technical standard-setting and leverage China’s competitive technologies to lead the formulation of international industry standards, with a view to dismantling standard barriers resulting from fragmented innovation.

We should promote organizational innovation and regulatory coordination to enhance systemic competitiveness

To this end, it is necessary to establish a modern industry advancement mechanism that is guided by strategic priorities and oriented toward ecosystem cultivation, so as to coordinate resource mobilization and ecosystem building. We should encourage leading enterprises to offer application opportunities to drive the integration of specialized and innovative SMEs into their supply chains, improve financial support mechanisms, and address weaknesses in basic research and critical links. We should break down regulatory barriers through institutional opening up, and pilot the implementation of high-standard rules on data flows, carbon footprint accounting, and other areas in platforms like pilot free trade zones. We must firmly uphold the multilateral framework, steadfastly support the reform of the WTO, and expand high-standard free trade networks, while opposing exclusive blocs. Moreover, we should push for mutual recognition of green standards and deepen cooperation on industrial chain resilience, thereby seizing the initiative in international rule-making.

Liu Zhenzhong is Director and Research Fellow at the Innovation Strategy Research Office, Institute of Industrial and Technological Economics, National Development and Reform Commission.

(Originally appeared in Qiushi Journal, Chinese edition, No. 4, 2026)