This chapter focuses on what happened in industrial dynamics of Guangdong since the crisis of 2008 when China entered into the investment-driven stage of development, particularly the role of Guangdong local governments as local developmental State in promoting industrial upgrading. The business strategies of local companies to react to market change are identified and evaluated in the framework of global value chain. The analysis is based mainly on data of questionnaire survey and case interviews during 2011–2012 for a policy research program of Guangdong Government. This chapter argues that in order to implement an appropriate policy strategy for industrial upgrading, the local governments actively adapted their policy instruments to tackle the potential of innovation through designing new organizational structures and issues in the fields of strategic technological forecasting and choosing, public-private partnership of innovation financing and investing, innovation management capabilities development, and technological assimilation by overseas merger and acquisition of local firms, etc. In sum, the success of new policy of industrial upgrading depended to a large extent on its authority’s own transformation into a new generation of developmental State, and proactive integration of policy instruments to the whole business upgrading strategies.