China uses subsidies extensively to take a leading role in the global markets of green-tech products such as battery electric vehicles and wind turbines. Against the background of the current EU investigations into Chinese subsidies in these sectors, this article takes a careful look at the Chinese subsidy system and provides new data on direct government subsidies to leading Chinese producers of electric cars and wind turbines. Extensive government support has allowed Chinese companies to scale up rapidly, to dominate the Chinese market and to expand into foreign markets. The article concludes that the EU should use its strong bargaining power due to the single market to induce the Chinese government to abandon the most harmful subsidies.
Even by conservative measures, researchers say that China’s subsidies green-tech products such as battery electric vehicles and wind turbines is multiple times higher compared to the support granted to countriesin tbe European Union (EU) and the Organisation for Economic Co-operation and Development (OECD).
The researchers conclude that the EU should use its strong bargaining power due to the single market to induce the Chinese government to abandon the most harmful subsidies.
TLDR:
Quantification of overall Chinese industrial subsidies is difficult due to "China-specific factors”, which include, most notably, below-market land sales, but also below-market credit to state-owned enterprises (SOEs), support through state investment funds, and other subsidies for which there are no official numbers.
Even when taking a conservative approach and considering only quantifiable factors of these subsidies, public support for Chinese companies to add up to at least €221.3 billion, or 1.73% of GDP in 2019. Relative to GDP, public support is about three times higher in China than in France (0.55%) and about four times higher than in Germany (0.41%) or the United States (0.39%).
Large industrial firms such as EV maker BYD are offered disproportionately more support. The industrial firms from China received government support equivalent to about 4.5% of their revenues, according to a research report. By far the largest part of this support comes in the form of below-market borrowing.
Regarding electrical vehicles, the researchers write:
China’s rise to the world’s largest market and production base for battery electric vehicles has been boosted by the Chinese government’s longstanding extensive support of the industry, which includes both demand- and supply-side subsidies. Substantial purchase subsidies and tax breaks to stimulate sales of battery electric vehicles (BEV) are, of course, not unique to China but are also widespread within the EU and other Western countries, where (per vehicle) purchase subsidies have often been substantially higher than in China. A distinctive feature of purchase subsidies for BEV in China, however, is that they are paid out directly to manufacturers rather than consumers and that they are paid only for electric vehicles produced in China, thereby discriminating against imported cars.
By far the largest recipient of purchase subsidies was Chinese NEV manufacturer BYD, which in 2022 alone received purchase subsidies amounting to €1.6 billion (for about 1.4 million NEV) (Figure 4). The second largest recipient of purchase subsidies was US-headquartered Tesla, which received about €0.4 billion (for about 250,000 BEV produced in its Shanghai Gigafactory). While the ten next highest recipients of purchase subsidies are all Chinese, there are also three Sino-foreign joint ventures (the two VW joint ventures with FAW and SAIC as well as SAIC GM Wuling) among the top 20 purchase subsidy recipients.
The researchers conclude that the EU should use its strong bargaining power due to the single market to induce the Chinese government to abandon the most harmful subsidies.
This is their advice? Make the technology for the green transition more expensive rather than enact your own subsidies?
China is simultaneously destroying the environment for profit and investing too much money in green technology?
A distinctive feature of purchase subsidies for BEV in China, however, is that they are paid out directly to manufacturers rather than consumers and that they are paid only for electric vehicles produced in China, thereby discriminating against imported cars.
That’s an interesting way to spin subsidies on the production of electric vehicles. Why would China pay companies in other countries to produce cars?
That sounds a bit contradictory but there’s an important details. Part of the accusation seems to be about picking winners, ie giving subsidies to specific companies rather than the sector as a whole.
The anti-subsidy investigation has been intended to confirm the Commission’s allegations that manufacturers of battery electric vehicles (BEV) in China benefit from countervailable – i.e. specific and advantageous to the receiving companies – subsidies
If that’s true then a tweak to subsidies might technically solve the issue without changing the EU-China competition balance.
IMHO the EU should focus on carbon border tax, and on doing it quickly and efficiently. The idea is taxing import from countries that don’t tax pollution, or at least less than the EU does, to make competing companies subject to similar emissions tax/regulation.
WTF. Is the abstract concept of “competition” more important than weaning out of fossil fuels in order to keep Earth habitable for humans?
I find this mindset doubly crazy because the USA grants a ton of subsidies to oil companies.
China’s government is horrible for a myriad reasons but this instance of concern trolling is just blatant pro-oil and pro-capital propaganda. The USA is antagonizing China for the wrong reasons and from the outside, their alleged motivations look stupid and petty.
It’s immensely disheartening to see the supposed “leader of the free world” acting in such a dumb way in the face of an impending catastrophe.
I posted this elsewhere already, but it also fits here goven many of the posts in this thread: It is not just about data/privacy concerns (which are underestimated imo, as China pursues an own agenda with collecting your data through Chinese tech) and ‘unfair’ subsidies, but about gross human rights violations.
In short, some parts of the cheap Chinese cars are made in concentration camps where people are forced to work under catastrophic conditions.
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Okay. Good for China?
This seems like a really weird way to say “EU countries aren’t investing enough into green tech”.
So… Match em? It’s not “unfair” if you don’t even bother to keep up
Do you want a livable planet or “fair competition”? China is doing what’s necessary and the west is complaining about " distorted competition".
The priorities are clear.
Anti Commercial-AI license
This is their advice? Make the technology for the green transition more expensive rather than enact your own subsidies?
Capitalists are going to burn this planet.
China is simultaneously destroying the environment for profit and investing too much money in green technology?
That’s an interesting way to spin subsidies on the production of electric vehicles. Why would China pay companies in other countries to produce cars?
That sounds a bit contradictory but there’s an important details. Part of the accusation seems to be about picking winners, ie giving subsidies to specific companies rather than the sector as a whole.
If that’s true then a tweak to subsidies might technically solve the issue without changing the EU-China competition balance.
IMHO the EU should focus on carbon border tax, and on doing it quickly and efficiently. The idea is taxing import from countries that don’t tax pollution, or at least less than the EU does, to make competing companies subject to similar emissions tax/regulation.
WTF. Is the abstract concept of “competition” more important than weaning out of fossil fuels in order to keep Earth habitable for humans?
I find this mindset doubly crazy because the USA grants a ton of subsidies to oil companies.
China’s government is horrible for a myriad reasons but this instance of concern trolling is just blatant pro-oil and pro-capital propaganda. The USA is antagonizing China for the wrong reasons and from the outside, their alleged motivations look stupid and petty.
It’s immensely disheartening to see the supposed “leader of the free world” acting in such a dumb way in the face of an impending catastrophe.
You need to understand, this is written by economists, the people who make a living by justifying human suffering.
I posted this elsewhere already, but it also fits here goven many of the posts in this thread: It is not just about data/privacy concerns (which are underestimated imo, as China pursues an own agenda with collecting your data through Chinese tech) and ‘unfair’ subsidies, but about gross human rights violations.
In short, some parts of the cheap Chinese cars are made in concentration camps where people are forced to work under catastrophic conditions.
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What about cleaning all yards? This ‘the West bad, China bad okay’ stance is dehumanising and ignorant. [Edit typo.]
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Do you say that to Europe, to China, or both?
It’s obvious you’re addressing only Europe. Why?
This is what I meant with ‘The West bad, China bad okay’. It’s hypocritical. It’s double-standards. It’s ignorant and disgusting.
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