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Outside In | Like the US and EU, China uses subsidies. It just does it more effectively
- China’s subsidies have been more effective than in most parts of the world because they are an intrinsic part of a distinct economic model
- Rather than targeting China, the US and Europe should examine the effectiveness of their own economic strategies
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Why you can trust SCMP
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If US President Joe Biden and European Commission President Ursula von der Leyen are to be believed, China’s exporters are trade cheats bent on subverting critically important sectors of their economies and jeopardising American and European national security.
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At the heart of this devious strategy are subsidies, comprehensively deployed across the Chinese economy, with state-owned enterprises (SOEs) at the core.
Talking to US steelworkers in Pittsburgh recently, Biden was unabashed. “For too long, the Chinese government has poured state money into Chinese steel companies, pushing them to make so much steel…” he said. “They’re not competing. They’re cheating.”
Von der Leyen is also unequivocal, though her primary concern is the threat of China’s electric vehicles (EVs). “Global markets are now flooded with cheaper Chinese electric cars. And their price is kept artificially low by huge state subsidies. This is distorting our market,” she said in her annual state of the union address in September, before announcing an investigation into the scale of the problem.
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There is no disputing China’s strategic use of subsidies to shape its economy. They sit at the heart of the “Made in China 2025” industry policy, unveiled in 2015. There is also probably no disputing the threat that this set of policies poses for many leading industries in the United States and Europe.
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