Hamilton Index 2026: China's Advanced Industry Dominance Upgrade and Global Supply Chain Restructuring

In May 2026, the Information Technology and Innovation Foundation (ITIF) released the Hamilton Index 2026 report, which, using global value-added data covering 1995 to 2022, paints a clear and stark picture of industrial competition: China's share of global output in the 10 advanced industries has approached one-quarter, and it holds a leading position in 7 sectors. This result is not a short-term export fluctuation, but a structural leap in China's industrial system driven by the combined effects of technology, capital, and policy. For global supply chain managers and industrial policymakers, this report is worthy of in-depth study.

I. From 1/5 to 1/4: China's "Better-than-Expected" Growth in Advanced Industries

The 10 advanced industries defined by the Hamilton Index cover information and information services, computer, electronic and optical products, chemicals (excluding pharmaceuticals), machinery and equipment, basic metals, motor vehicles, fabricated metal products, pharmaceuticals, electrical equipment, and other transport equipment. In 2022, the combined global value added of these industries was approximately $11.9 trillion, accounting for 11.6% of the global economy. Compared with 1995, this share has barely changed, meaning that the size of the "pie" of advanced industries in the global economy is largely fixed, and competition among countries is highly zero-sum.

It is precisely on this fixed-size "pie" that China has achieved a stunning share leap: from 19% in 2012 to 24.9% in 2022, increasing by about 0.6 percentage points per year on average. This pace is almost unprecedented in industrial history. More critically, not only is China's output in advanced industries the largest in absolute terms globally, but its degree of specialization relative to its economic size is also clearly "above par." The report uses the location quotient (LQ) to measure the deviation of a country's share of advanced industries from the global economic average: China's LQ is 1.36, 36% above the global average; while the United States is only 0.88, 12% below the average. This means that, given the size of the U.S. economy, its advanced industry output would theoretically need to be 56% higher than its actual value to match China—a gap of approximately $1.5 trillion.

China does not have an absolute advantage in all advanced industries, but it has formed mutually reinforcing cluster effects across multiple segments of the industrial chain. East Asian economies such as Taiwan (LQ 2.63), South Korea (ranked second), Singapore (fourth), and Japan (seventh) still maintain high specialization in specific fields, but China, by virtue of its full industrial chain coverage, has combined its shares across various sectors into an overall lead. This "systems integration" capability was never achieved by previous manufacturing powerhouses such as Japan and Germany.

II. From "Copier" to "Innovator": The Qualitative Turning Point of China's Industrial UpgradingThe report clearly states in its introduction that China has transformed from a "simple photocopier" into an "innovator." This conclusion is based on changes at two levels. First, China's growth in advanced industries no longer relies solely on low factor costs, but increasingly on technology premiums. Taking computer, electronic, and optical products as an example, China's position in the global industrial chain has extended from final assembly to core components, panels, semiconductor packaging and testing, with a significant increase in value-added rates. Second, China has built new advantages in the integration of digital technologies (IT and information services have the largest output among 10 industries, accounting for 20%) with advanced manufacturing, enabling traditional industries such as machinery and electrical equipment to undergo intelligent upgrades.

China's industrial policy has played a key role in this process. From "Made in China 2025" to the recently emphasized "new quality productive forces," the policy mainline has consistently pointed toward the high-end advancement of advanced manufacturing. This sustained investment driven by national will has provided long-term expectations for enterprises in R&D, capacity expansion, and supply chain security. The report points out that China's global share growth in advanced industries has been much faster than its GDP share growth, indicating that policy intervention has effectively promoted the reallocation of resources toward strategic industries.

Of course, the improvement of innovation capability does not happen overnight. China still has obvious shortcomings in areas such as semiconductor equipment and industrial software, but data from the Hamilton Index shows that the competitiveness of the overall industrial chain has formed a positive cycle. Once breakthroughs are achieved in key fields, its global market share will expand further.## 4. Global Supply Chain Restructuring: Multipolarity and China's Hub Position

The Hamilton Index not only shows country-level shares, but also indirectly reflects the geographic changes in global supply chains. One notable phenomenon is that some emerging economies are becoming "new entrants" in advanced industries. Vietnam's LQ is as high as 1.82, ranking third globally, mainly due to the assembly segment of the computer electronics industry spilling over from China. Malaysia, India, Mexico, Thailand and other countries also have LQs above 1, indicating that the global manufacturing network is evolving from a single center to multiple centers.

This restructuring has not weakened China's position; rather, it has reinforced its function as a "core node" in regional supply chains. China remains the largest hub for global trade in intermediate goods, and much of the production capacity relocated to Vietnam and Mexico still relies on imports of core components and machinery equipment from China. In other words, China's lead in advanced industries has expanded from final products to production tools and upstream materials—precisely the characteristic of "national power industries" emphasized by the Hamilton Index.

For international buyers and multinational corporations, this means the "China+1" strategy needs to be reassessed. Simply moving assembly operations out of China does not eliminate dependence on Chinese supply chains; it may instead increase costs and risks. The report's data show that China's global share in upstream industries such as base metals and chemicals is also growing—sectors that underpin almost all manufacturing. Therefore, "decoupling from China" in global supply chains is not realistic in the short term.

5. Outlook: Competition Enters a Protracted War, Industrial Governance Is the Deciding Factor

The timing of the release of the Hamilton Index 2026 is noteworthy—it comes precisely as major global economies are reviewing their own industrial policies. For China, a one-quarter market share is a milestone, but it also means that further growth will face greater external resistance. How to achieve self-reliance and controllability in "bottleneck" areas such as semiconductors and high-end software, how to balance production capacity with domestic demand absorption, and how to respond to the West's "friend-shoring" segmentation strategy are all questions that must be answered in the next phase.

For the United States and the West, the report is undoubtedly a strategic warning. But unlike the purely "competitiveness anxiety" of the past, the report offers some constructive ideas: reversing the decline in LQ by increasing investment in advanced industries, strengthening supply chain resilience, and coordinating allied industrial policies. However, given the scale, ecosystem, and policy advantages China has already accumulated, any catch-up effort will require more than a decade of sustained investment.

The competition in advanced industries is, in essence, a competition of national innovation systems and industrial governance capabilities. China's rise from the periphery to the center in just over two decades proves that latecomer countries can achieve leaps through strategic focus. In the next decade, this competition will extend from product share to the power to set technology standards, digital infrastructure, and green rules. The Hamilton Index tells us: the era of winner-take-all is over, but the redrawing of the global industrial map has only just begun.(This article is based on the ITIF report "The Hamilton Index, 2026". All facts and data in the article are sourced from this report and do not constitute investment advice.)