The 2025 Central Economic Work Conference, held in Beijing on Dec 10-11, marked a significant pivot in China's macroeconomic policies to boost technological progress. Innovation is no longer treated as an isolated research agenda, but has been integrated into industrial organization and macroeconomic governance. Strengthening coordination and synergy across macro-level policies has become a central mechanism for stabilizing growth, advancing structural transformation, and cultivating new growth drivers amid intensifying international competition and trade restrictions.

This policy recalibration signals a broader redefinition of innovation's role in China's development strategy.

Scientific and technological development typically proceeds through three stages: laboratory research, engineering validation and industrialization. In most countries, including China, policy support tends to concentrate on the first and third stages — basic research funding and large-scale industrial deployment — while the intermediate transition from laboratory results to engineering applications often receives limited institutional attention. This gap is widely recognized as the "Innovation Valley of Death", a global phenomenon where scientific achievements fail to be commercialized, resulting in a disconnect between technological breakthroughs and industrial development.

China's recent policy framework seeks to address this bottleneck directly by reorganizing science and technology policies into institutional tools serving specific industrial applications. The 2025 meeting proposed a "new round of high-quality development actions for key industrial chains" and emphasized the role of the "Artificial Intelligence+" initiative in empowering industrial applications. This approach ensures that technological progress is directly linked to industrial scaling capabilities, moving beyond isolated R&D inputs to enhance the overall resilience and competitiveness of industry chains.

A primary instrument supporting this integration is the pilot-scale testing platform. Formally launched as a nationwide initiative in 2024, this platform serves as a critical bridge — often termed "the last mile of innovation" — between prototypes and mass production. Typically spearheaded by local authorities in collaboration with leading enterprises and research institutions, the pilot-scale platform provides shared infrastructure for process validation, engineering testing and early-stage scale-up, particularly in advanced manufacturing sectors.

While the United States and the European Union typically implement such policies through industry-led institutes, China's platforms are distinctively embedded within regional industrial strategies. A representative example is the new materials pilot-scale testing platform jointly established by the Shaoxing city government, Zhejiang province, and the Chinese Academy of Sciences, and operated by CAS New Materials Technology Co, Ltd. Leveraging Shaoxing's industrial concentration in new materials, the platform has secured agreements covering 19 projects along the industry chain and achieved its first industrialized project in June 2025.

By extending policy coordination across the entire innovation life cycle, China is building system-level capabilities that align technological progress with industrial upgrading. This institutional design aims to internalize innovation more effectively as a driver of economic growth, strengthening China's competitive position in global manufacturing and technology markets.

Beyond industrial policy, the conference also emphasized enhancing intellectual property protection systems specifically for emerging fields and innovating financial services tailored to science and technology. These priorities indicate a broader transformation in which legal, financial and regulatory policies are no longer treated as supplementary arrangements, but as integral components of the innovation ecosystem.

On the one hand, traditional policy domains such as finance and the rule of law are becoming more specialized and better aligned with the needs of innovation-intensive companies. On the other hand, innovation-related policies in these areas are increasingly coordinated through cross-departmental collaboration, generating more comprehensive and diversified support for innovative activity.

Financing support for innovative companies illustrates this shift clearly. China's financial system remains dominated by indirect financing, with bank loans accounting for 52.8 percent of the total increase in social financing as of the end of 2024. However, technology companies, especially small and medium-sized enterprises, often lack collateral and face high uncertainty during R&D, reducing commercial banks' willingness to lend.

To address this structural constraint, China's monetary authorities have introduced a distinctive policy approach. The People's Bank of China has launched two rounds of central bank lending facilities for sci-tech innovation in 2022 and 2024, with a total quota of 700 billion yuan ($100 billion). Through this facility, the central bank covers 60 percent of the principal for qualifying loans issued by financial institutions to certified high-tech enterprises. By introducing such structural monetary policy tools, the central bank seeks to realign incentives within the banking system and encourage greater support for innovative enterprises.

Interdepartmental coordination has further reinforced this financing framework. In 2024, the Ministry of Finance introduced a special guarantee scheme to support science and technology innovation, under which government-backed guarantee institutions assume up to 80 percent of the risk for loans issued to technology-based SMEs. This arrangement combines fiscal support, credit enhancement, and market-based screening by financial institutions, illustrating how government guidance and market mechanisms are being jointly mobilized.

This structured transformation of traditional policy instruments, together with cross-departmental coordination, exemplifies China's strength in "pooling all resources to complete major missions". Rather than fragmenting responsibilities across separate policy domains, the current approach integrates innovation goals within a unified macro-governance framework, drawing on the comparative advantages of different institutions to provide multidimensional support.

Overall, the policy focus emerging from the 2025 Central Economic Work Conference moves beyond mere expansion of R&D investment. Through an emphasis on industrial chain orientation and cross-sectoral integration, China's policies to boost innovation have evolved into a sophisticated form of industrial organization and economic governance, reshaping the relationship between innovation and economic growth. This strategic shift leverages China's institutional advantages amid intensifying international competition and trade restrictions, and is expected to further bolster the nation's innovation-driven and domestic demand-led economic growth.

Wu Wenfeng is a professor of finance at the Antai College of Economics and Management and the director of the Division for Development Liberal Arts at Shanghai Jiao Tong University. Zuo Zhengyu is a research fellow at Antai College of Economics and Management at Shanghai Jiao Tong University. The authors contributed this article to China Watch, a think tank powered by China Daily.

The views do not necessarily reflect those of China Daily. 

Contact the editor at editor@chinawatch.cn.