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China's subsidies: Smarter than rivals, debate rages on
🇸🇬 Singapore /Economy & Trade

China's subsidies: Smarter than rivals, debate rages on

From CNA · () English

Translated from English, summarized and contextualized by DistantNews.

At a glance

Analysis Named sources Context piece
  • China's export surge is causing concern among global policymakers, with fears of a second "China shock."
  • A debate is ongoing between Chinese economists and organizations like the OECD and IMF regarding the extent and nature of Chinese subsidies and their impact on competitiveness.
  • While China's subsidies are increasing, particularly in strategic sectors, the IMF notes that other nations, including the US and EU, also provide significant subsidies, sometimes disproportionately in non-strategic areas.

China's booming exports, which neared $4 trillion last year, are sparking anxiety among global policymakers who fear a repeat of the "China shock" that disrupted markets previously. This concern is amplified by observations of China's advanced capabilities in electric vehicles, green technology, and artificial intelligence.

A recent dispute between Chinese economists and the OECD highlights the debate over China's economic strategy. The OECD reported that China's subsidies were significantly higher than those of its wealthy rivals in 2024, contributing substantially to its global market share gains. However, Chinese economists like Kai Guo argue that subsidies are no longer the primary driver of competitiveness, questioning the OECD's calculations, particularly regarding the impact of cheap loans. A World Economic Forum paper also found limited evidence of widespread below-market financing.

subsidies are no longer the most convincing explanation for Chinese firms’ growing competitiveness

— Kai GuoA Chinese economist arguing against the OECD's findings on subsidies.

An IMF paper offers a nuanced perspective, acknowledging the difficulty in measuring subsidies due to poor data and varying definitions. It points out that even by a narrow definition, Chinese subsidies have increased, accounting for over 2.5% of value added in 2023. Crucially, the IMF highlights that China is not alone in providing government support, with the US, Canada, and the EU also offering substantial subsidies. The paper further distinguishes between strategic and non-strategic sectors, noting that China's subsidies are more concentrated in areas like semiconductors and tech hardware, a pattern different from that seen in the US and EU.

just focusing on direct grants and aid

— IMF paperDescribing the narrow definition of subsidies used in its calculations, excluding cheap loans.
DistantNews Editorial

Originally published by CNA in English. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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