WASHINGTON (April 16, 2026) — The Progressive Policy Institute (PPI) today released a new report urging America’s governors and mayors to dramatically expand their investments in advanced technology industries, citing China’s aggressive and surprisingly decentralized strategy of provincial and municipal tech spending as a competitive threat that federal policy alone cannot match.
The report, “What America’s Governors and Mayors Can Learn from China’s Local-Facing Investment Strategy,” by PPI Vice President and Chief Economist Michael Mandel, documents how Chinese provincial and municipal governments are outspending their U.S. counterparts in sectors ranging from semiconductors and electric vehicles to satellites, biotech and carbon fiber, while American state and local investment has stalled for two decades.
“State and local government investment spending has risen only 15% in real terms from 2005 to 2025, far slower than the overall economy,” said Mandel. “Meanwhile, China’s local governments are pouring enormous sums into the industries that will define the next generation of global economic leadership.”
The report finds that Chinese local governments accounted for 844 billion yuan in science and technology spending in 2024, roughly double the central government’s outlay. By contrast, U.S. state and local net investment has fallen from 1.0% of GDP in 2005 to just 0.7% in 2025, leaving an estimated $110 billion annual shortfall relative to historical norms.
Mandel draws on a May 2025 National Bureau of Economic Research paper finding that subnational Chinese governments account for 87% of the explicit industrial policies cited in public Chinese government documents. Cities including Shenzhen, Shanghai, and Beijing are committing billions to chip design, EV manufacturing, satellite development, and biosciences, while smaller cities such as Weihai are making major investments to foster industries like the manufacture of high-quality carbon fiber, a critical material for aerospace and wind turbine blades.
The report does not advocate that U.S. states simply replicate China’s model. Chinese local governments have taken on enormous debts through direct borrowing and off-budget financing vehicles, with the International Monetary Fund estimating 16 trillion renminbi, or roughly $2 trillion, in additional debt in 2024 and 2025 alone. “Financially prudent risk-taking is the key to sustainable growth,” said Mandel. “U.S. states and cities should invest in their future while keeping their borrowing under control.”
The report identifies several high-priority areas for state and local action, including AI data centers and application development, worker training and AI extension programs for small businesses, space-related infrastructure funded through new financing tools such as space bonds, and support for advanced biosciences, manufacturing, and agriculture. It points to New York’s Empire AI Partnership and the Texas Space Commission as early models of the kind of proactive state-level investment that can drive innovation and economic competitiveness.
“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.”
Read and download the report here.
Founded in 1989, PPI is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Find an expert and learn more about PPI by visiting progressivepolicy.org. Follow us at @PPI.
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Media Contact: Ian O’Keefe – iokeefe@ppionline.
