East Asia and Pacific Economic Update, April 2026 : Industrial Policy in the Digital Age

Economic growth in East Asia and the Pacific (EAP) has remained resilient amidst increased trade restrictions and still-elevated global policy uncertainty. Overall regional growth is projected to slow in 2026 but that is largely because of deceleration in China amid persistent weakness in property-related investment and subdued consumer confidence. Longer-term growth in the region’s economies, however, has been driven by capital accumulation rather than productivity improvements. One reason is the changed pattern of structural change, with labor increasingly moving out of agriculture and not into high productivity manufacturing or services, but into lower productivity services. Another is that the leading regional firms are falling behind the global frontier in the digital sectors where the world is seeing the most rapid innovation. In this context, industrial policy is increasingly viewed by policymakers as a mean to open new development pathways. We suggest a practical, three-principle approach to industrial policy. First, get the fundamentals right. Investments in education, infrastructure, and government effectiveness typically yield the highest returns. Second, do no harm. Procompetition reforms—especially in services—can be powerful forms of industrial policy. Lastly, scrutinize targeted interventions rigorously