Foul Play? On the Scale and Scope of Industrial Subsidies in China
www.ifw-kiel.de
China makes extensive use of subsidies in order to take a leading role on the global markets in the green technology sectors of electric vehicles, wind turbines and railway rolling stock. According to DiPippo et al. (2022) and recent OECD studies, the industrial subsidies in China are at least three to four times or even up to nine times higher than in the major EU and OECD countries. According to a very conservative estimate, industrial subsidies in China amounted to around EUR 221 billion or 1.73% of Chinese GDP in 2019. According to recent data of 2022, direct government subsidies for some of the dominant Chinese manufacturers of green technology products had also increased significantly - the electric car manufacturer BYD alone received EUR 2.1 billion. The authors point out that Chinese companies are benefiting from further support measures, including subsidized inputs, preferential access to critical raw materials, forced technology transfers, the strategic use of public procurement and the preferential treatment of domestic firms in administrative procedures. The authors recommend the EU to use its anti-subsidy proceeding against BEV imports from China to enter into negotiations with the Chinese government and persuade it to abolish public support measures that are particularly harmful to the EU.

Study download (pdf)

Chinese leading electric car manufacturer BYD received direct state subsidies of approximately EUR 220 million in 2020, rising to EUR 2.1 billion in 2022. In terms of business revenues, direct subsidies increased from 1.1 percent in 2020 to 3.5 percent in 2022. This is the result of an investigaton by Germany’s Kiel Institute For The World Economy.

Additionally, BYD receives significantly more purchase premiums for electric cars in China compared to other domestic manufacturers like GAC or foreign companies producing locally, such as Tesla or VW’s joint ventures, the study says.

However, the figures clearly understate the true scale and scope of green technology subsidies in China, ss BYD also benefits from subsidies to battery producers through lower input prices, as well as subsidies to buyers of battery electric vehicles, thus stimulating demand.

China’s massive state subsidies are not limited to EV cars. According to a very conservative estimate, industrial subsidies in China amounted to around EUR 221 billion or 1.73% of Chinese GDP in 2019.

The authors urge the European Union to engage in negotiations with the Beijing government amidst the recently initiated anti-subsidy proceeding against imports of electric vehicles from China, aiming to persuade China to withdraw subsidies particularly harmful to the EU. Given China’s current macroeconomic weakness, its relative strength in green technology sectors, and its tensions with the US, the authors see a realistic chance of successful negotiations.

Next week, German chancellor is visiting China, accompanied by an induszry delegation.

  • Match!!@pawb.socialEnglish
    1·
    7 months ago

    i don’t love china but “we must stop them from checks notes subsidizing green energy” is bizarre

      • ErilElidor@feddit.deEnglish
        0·
        7 months ago

        But we can’t afford that. We somehow need to subsidize fossil energies after all, because of the economy!

        /s obviously

    • federalreverse-old@feddit.deEnglish
      0·
      7 months ago

      China is trying to build hegemonial economic power, with Chinese products being an integral component of every future supply chain. Green technologies are an excellent vehicle for that, because they’re fairly future-proof and will see extreme growth.

      But sure, the EU needs an equivalent to the US’s IRA if it wants to have any industry or political/economic independence going forward.

      • msage@programming.devEnglish
        0·
        7 months ago

        I’m sorry, I’m afraid that has already happened?

        What exactly is being manufactured outside China? How many items in your household are not from China?

        • federalreverse-old@feddit.deEnglish
          0·
          7 months ago

          China owns a lot of manufacturing capacity for basically everything already, correct. However, in most of these industries there are alternative supply chains, often a bit more expensive and a lot lower-capacity. But if in the future, China is the only country that can produce certain goods at all because e.g. they have the only scientists who know their way around a certain technology, then that’s a different situation still.

          (Also, quite a few things here are not made in China, including recent buys. That list excludes most electronics though, I give you that.)