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.

  • Blackout@kbin.run
    651·
    3 months ago

    What is sad is the US also funnels billions into the auto industry but we don’t even get affordable prices for our investment, let alone prices that would crush foreign competition.

    • hydroptic@sopuli.xyzEnglish
      203·
      3 months ago

      US companies probably use those subsidies to raise executive pay & bonuses

      • 0x815@feddit.deOPEnglish
        51·
        3 months ago

        hydroptic@sopuli.xyz

        US companies probably use those subsidies to raise executive pay & bonuses

        In that regard the U.S. system is very much the same as China’s, but that aside there are major important differences.

        [Edit typo.]

    • protist@mander.xyzEnglish
      206·
      3 months ago

      In the US, people working in the auto industry are largely unionized and getting pretty decent pay and benefits too. The US also has pretty strict safety standards that require planning and testing that cost a ton of time and money.

      • Blackout@kbin.run
        191·
        3 months ago

        Thanks to the recent strikes we all know what a small percentage of their revenue goes to the workers. They are also why banning Chinese imports has validity. But lack of competition leads to 7 year car loans.

      • InternetUser2012@midwest.socialEnglish
        61·
        3 months ago

        And they use that to get people to think it’s ok for the prices and even defend them, despite record profits across the industry.

    • Burn_The_Right@lemmy.worldEnglish
      10·
      2 months ago

      But a large percentage of those billions goes into billionaire pockets and much of that is then spent on campaign contributions and lobbying, thus completing the cycle of laundering our tax money.

      We are food for the rich.

    • Maggoty@lemmy.worldEnglish
      1·
      2 months ago

      Why would they need to crush foreign competition? Biden already revoked the subsidies for them. And in unrelated news Ford and GM decided American EVs can just be bad.