**Introduction** Advanced economies can respond to rising competition from Chinese manufacturing by strengthening domestic productivity through disciplined industrial policy, using established trade remedies to address demonstrable distortions, and building resilience through diversification and coordination rather than broad localization. Taken together, these adjustments address competitive pressures while preserving the efficiency gains associated with open and predictable trade. **Policy responses to rising manufacturing competition** **1.** **Design industrial policy to raise productivity and maintain competition** Industrial policy is most effective when it focuses on economy-wide capabilities — such as workforce skills, applied research, infrastructure, standards, and permitting — rather than ongoing protection for individual firms or sectors. By strengthening shared inputs, these measures raise productivity across a broad base of producers and reduce dependence on permanent support[1]. Where public support is used, outcomes are stronger when it is time-limited, transparent, and conditional on clearly defined performance criteria, including capacity delivery, innovation milestones, or emissions intensity. This design limits fiscal risk, reduces policy lock-in, and reinforces incentives for firms to compete rather than rely on continued protection[2]. Maintaining competitive market structures is therefore a central complement to industrial policy. Aligning support measures with competition policy and open entry conditions helps ensure that public intervention does not entrench concentration or weaken market discipline over time[1]. **2.** **Enforce trade rules using established instruments** Even with stronger domestic capabilities, competition pressures persist when imports benefit from dumping or subsidization. Anti-dumping and countervailing duties allow authorities to target specific distortions through investigation and proportionality, offering a more precise alternative to broad tariffs that raise costs for downstream industries[3][4]. Effective use of trade remedies depends on clear information about how support is provided. Better identification of subsidies — whether delivered through state enterprises, preferential finance, or below-market inputs — improves the factual basis for countervailing measures and helps authorities target responses more precisely[5][6]. Where imports rise sharply over a short period, safeguard measures can offer temporary adjustment space. When applied in line with established requirements and limited in scope and duration, safeguards support short-term adjustment without replacing longer-term efforts to improve competitiveness[7]. **3.** **Strengthen resilience through diversification and coordination** Beyond enforcement, resilience improves when firms and economies are less dependent on single sources of supply. Broadening sourcing and production networks across suppliers and locations reduces exposure to shocks and policy shifts, while preserving the benefits of international scale and specialization[8]. At the policy level, greater coordination on industrial subsidies and excess capacity — including transparency and shared reference points — can limit subsidy escalation and reduce the risk of policy-driven fragmentation in integrated value chains. This supports adjustment without encouraging offsetting or retaliatory intervention[9]. By contrast, widespread use of local content requirements tends to raise costs, fragment supply chains, and increase the likelihood of retaliation. Exercising restraint helps preserve competitiveness and flexibility, while allowing narrowly defined exceptions where clearly justified[10]. **Conclusion** A durable response to intensified competition from Chinese manufacturing rests on productivity-enhancing industrial policy, targeted and rules-based trade enforcement, and resilience built through diversification and coordination. These elements strengthen competitiveness while limiting inflationary pressures and reducing the risk of systemic fragmentation.
