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.

  • blazera@lemmy.worldEnglish
    1·
    7 months ago

    What a major embarassment for EU. China benefitting the climate by getting fossil fuels off the roads. And EU throwing a tantrum to try and stop them.

    • 0x815@feddit.deOPEnglish
      0·
      7 months ago

      There are some comments like this, suggesting that the commentators didn’t even click the link.

      • blazera@lemmy.worldEnglish
        0·
        7 months ago

        China is investing government money into electric car companies so they can produce more of them for cheaper. this gives them a competitive edge against electric car companies in EU that arent being bolstered by government subsidies. The EU has two options: one, the environmental option, they compete by subsidizing their own car companies to produce electric vehicles, which would accelerate the effort to stop relying on fossil fuels and reduce emissions by having two regional markets focused on vehicle electrification. Or two, the capitalism option, they compete by pressuring China to drop their subsidies, which would slow down efforts to stop relying on fossil fuels as neither regional market is focused on vehicle electrification.

        from your article, “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.”

        ensuring we stay on track for the absolute worst timeline for humanity.

        • 0x815@feddit.deOPEnglish
          0·
          7 months ago

          @blazera@lemmy.world

          China is investing government money into electric car companies so that they can produce more if them cheaper …

          Your positive framing of China’s economic policy is completley out of touch. It really helps to read more than a few lines of a post. The negative consequences of Chinese subsidies are obvious in tbe country’s domestic market, and there’s no reason to copy that for the world.

          China’s EV price war is killing brands and infuriating consumers

          China’s EV market has slowed down as consumers cut spending in a post-pandemic economy.

          Brands are fighting a fierce price war in a crowded industry, leading to fast depreciation of electric cars.

          Some startups are on the brink of collapse, leaving software maintenance in limbo.

          And this is just one example. Read the study, find more research, tere is a lot.of it.

          • blazera@lemmy.worldEnglish
            0·
            7 months ago

            Man thats a weird article trying to frame cheaper EVs as a terrible thing. Chinas EV market is by far the largest and fastest growing in the world, by a huge margin.

            • 0x815@feddit.deOPEnglish
              0·
              7 months ago

              @blazera@lemmy.world

              Chinas EV market is by far the largest and fastest growing in the world

              Did you read the articles?

              Chinese EV car manufacturers are making losses, some already filed for bankrupcty, practically all survive on state subsidies. Chinese customers are left behind with no after-sales services and software updates.

              • blazera@lemmy.worldEnglish
                0·
                7 months ago

                basically a lot of companies attempted to get into the game but were crushed by BYD. an effect of going bankrupt early on because you didnt have enough customers is…you didnt have a lot of customers. So customers left without support are a small minority. The companies responsible for China’s massive EV growth are alive and well.

                • 0x815@feddit.deOPEnglish
                  0·
                  7 months ago

                  @blazera@lemmy.world

                  The companies responsible for China’s massive EV growth are alive and well.

                  Which ones?

                  BYD is the one which is ‘alive’ as they live heavily on state subsidies (their subsidies have at least ten-fold since 2020).

                  HiPhi, once a promising start-up, Baidu-backed WM Motor, Tencent’s Aiways - all ran out of liquidity to sustain operations. Other brands such as Levdeo and Singulato entered bankruptcy proceedings.

                  Which ones are doing well? There are none, even the Chinese government appears to have given up on these companies as they appear to focus solely on BYD given a strong deflationary domestic market.

                  • blazera@lemmy.worldEnglish
                    0·
                    7 months ago

                    BYD is the one which is ‘alive’ as they live heavily on state subsidies (their subsidies have at least ten-fold since 2020).

                    this just sounds fantastic to me. every country that makes EV’s should be heavily subsidizing them. You’re making capitalism look worse and worse, are you gonna go after American libraries for not being profitable enough and needing state funding?