The Progressive Policy Institute (PPI) released a report on April 16 urging governors and mayors across the United States to significantly increase their investments in advanced technology industries, citing the aggressive approach of Chinese provincial and municipal governments as a growing competitive threat.
The report highlights that while China’s local governments are spending heavily on sectors such as semiconductors, electric vehicles, satellites, biotech, and carbon fiber manufacturing, investment by American state and local governments has stagnated over the past two decades. This trend raises concerns about the ability of federal policy alone to keep pace with global economic changes.
“State and local government investment spending has risen only 15% in real terms from 2005 to 2025, far slower than the overall economy,” said Michael Mandel, PPI Vice President and Chief Economist. “Meanwhile, China’s local governments are pouring enormous sums into the industries that will define the next generation of global economic leadership.”
According to Mandel’s analysis, Chinese local governments spent approximately 844 billion yuan on science and technology in 2024—about twice what China’s central government allocated. In contrast, U.S. state and local net investment dropped from one percent of GDP in 2005 to just 0.7 percent by 2025. The resulting annual shortfall is estimated at $110 billion compared with historical norms.
Mandel also referenced research indicating that subnational Chinese authorities are responsible for most explicit industrial policies cited in public documents. Cities like Shenzhen, Shanghai, Beijing—and smaller cities such as Weihai—are making large-scale investments in key technologies ranging from chip design to high-quality carbon fiber production for aerospace applications.
However, Mandel cautioned against directly copying China’s approach due to its risks: “Financially prudent risk-taking is the key to sustainable growth,” he said. “U.S. states and cities should invest in their future while keeping their borrowing under control.”
The report recommends several priority areas for action including AI data centers development; workforce training; space-related infrastructure using new financing tools like space bonds; support for biosciences; advanced manufacturing; and agriculture initiatives. Early examples cited include New York’s Empire AI Partnership and Texas Space Commission.
“Governors and mayors are looking for opportunities to exert technology leadership and increase competitiveness while maintaining fiscal prudence,” said Mandel. “It’s time for far-sighted state and local officials to take advantage of new technologies and new opportunities rather than wait for Washington.”