This study explores how local governments in China maintain a role in policy implementation and influence outcomes despite the central government's greater control under Xi Jinping's leadership. By analyzing the case of a new industrial policy for nurturing “Specialized Refinement, Differential, and Innovation (SRDI)” small giant enterprises, it shows how regions, regarded as competing interest groups, navigate the complex relationship between central and local governments. The research employs Extreme Bounds Analysis (EBA) and regression methods, utilizing data from 31 Chinese provinces and cities from 2019 to 2022 as observational samples. These data serve as observational samples to assess the impact on the regional distribution of small giant enterprises. The empirical findings highlight the magnitude of a region' s access to SRDI policy resources as being primarily subject to various local advantages, including regional innovation resources, industrial scale and agglomerations, and regional marketization among other factors. This new industrial policy under a fragmented authoritarian regime tends to benefit already advanced regions. Consequently, regions often prioritize their existing industrial strengths. This approach may potentially diverge from the central government' s goals of achieving supply chain autonomy by addressing gaps in the industrial chains.