German Media: Are China's Competitive Advantages Due to State Subsidies?
An analytical article from NZZ states that despite the strong competitive pressure from China facing European industry, introducing subsidies and trade barriers will not solve the problem.
The NZZ analysis points out that punitive tariffs and other countermeasures introduced by Western countries so far have yielded minimal results. The article titled "Do State Subsidies Really Bring Economic Miracles?" writes:
"Is Beijing's intervention in the market really greater than that of Western nations? The so-called state subsidies not only involve direct fiscal support but also include tax incentives, low-interest loans, and regulatory measures restricting competition that grant domestic enterprises a competitive advantage. A comprehensive answer to this question must rely on data and professional literature."
The OECD recently reached an interesting conclusion. After surveying 525 major industrial enterprises worldwide, the organization found that China absolutely leads globally in providing state subsidies. At the same time, over the past few years, intervention in markets by other countries has also been gradually increasing.
Compared with OECD member countries, since 2010, Chinese automakers have received more state subsidies, including preferential loans. In absolute terms, China's subsidies are twice those provided to their Western counterparts. When calculated per revenue, they are four times higher. Moreover, chemical producers, machinery manufacturers, shipbuilders, and solar panel makers have also greatly benefited from substantial subsidies offered by Beijing. However, the situation differs in the semiconductor industry. In this field, Washington is the largest funder. The U.S. government is providing massive funding to boost its domestic chip industry."
The NZZ analytical article cites some experts' views stating it is undeniable that the Chinese government provides high-level subsidies to relevant industries. Yet, Chinese companies' success cannot be attributed solely to these subsidies; rather, they also benefit from rapid product iteration, a well-developed supply chain system, advantages of mass production, and intense domestic market competition.
"Just like in many other sectors, China adopts a 'more is better' principle when cultivating corporate competitiveness. This has become ingrained in China’s industrial system. As soon as Beijing’s leadership identifies an industry as a future-oriented sector, local governments rush to offer various subsidies to related enterprises. Currently, humanoid robotics and flying taxi industries are experiencing such a wave of support. This industrial strategy will inevitably lead to serious waste. Today, most enterprises classified under so-called future industries are struggling under severe overcapacity, forcing them into life-or-death price wars."
Original source: toutiao.com/article/1870071871003648/
Disclaimer: The views expressed in this article are those of the author(s) alone.