This article deals with the transformation of the state and the change in industrial and regional development policy that took place in Taiwan in the context of a globalizing economy. Taiwan’s authoritarian Kuomintang regime was able to concentrate resources on developing strategic industries in key regions, notably Hsinchu, and rendered rural industrialization possible by extending the global production network to central Taiwan. Dramatic change occurred when external economic pressure and domestic political struggle challenged the arbitrary power of the state after the mid‐1980s. To keep business rooted at home, the state led the industries to upgrade by offering preferential subsidies, at the same time forbidding the outflow of key industries to China. This policy was not entirely successful. When the populist Democratic Progressive Party came to power, it reinforced the policy by launching new science parks to both compensate business groups for losses due to the detention policy, and balance regional disparity for electoral gain. The major industrial and regional competitiveness measures that resulted reduced resource allocation to a pork barrel, while Hsinchu’s competitive advantage in cross‐border regional integration was gradually lost as a collective order came to govern the process. The article ends with some reflections on the post‐developmental state and the interplay of populist politics, the liberalized economy, and the new regionalism.