Data suggests that Chinese companies receive significantly more state support, making it increasingly challenging for Western businesses to compete.
Chinese manufacturers receive significantly more government support than their Western counterparts, with the Organisation for Economic Co-operation and Development (OECD) calculating that Chinese businesses benefit from government subsidies equivalent to 3.7% of their revenues, compared to only 0.4% for countries in the rich world.
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This support helps explain China’s dominance in various sectors such as solar panels, batteries, and steel, while also shedding light on the decline of the UK’s manufacturing base. Chinese assistance is targeted towards key sectors like solar photovoltaic and base metals production, whereas the UK has historically been less interventionist, leading to plant closures due to inability to compete with cheap imports.
The OECD analysis highlights various forms of state aid, such as direct grants, special tax rates, and low-interest loans, with China providing higher levels of support than other regions. This data underscores the need for a more equitable global trading system that addresses these interventions.
China has been particularly generous in sectors like aluminium smelting, cement manufacturing, and solar cell production, while recent US initiatives under Joe Biden aim to provide subsidies for semiconductor and green technology production in the US, though it may still fall short of Chinese levels of state aid.
The disparities in state aid between countries and sectors underscore the need for more transparency and fairness in global trade policies to ensure a level playing field for all manufacturers.
