How Much Does China Subsidize Its Economy?
Global comparison: China’s industrial support is roughly twice as large as what’s typical in advanced economies, and its side effects on efficiency are correspondingly greater.
Michael Magoon • How Much Does China Subsidize Its Economy?
Measured impact: These distortions are estimated to lower China’s overall productivity by about 1.2 percent, translating to as much as a 2 percent reduction in GDP compared with a no-subsidy scenario.
Michael Magoon • How Much Does China Subsidize Its Economy?
Winners: Both state-owned and private companies benefit, though in different ways—SOEs receive cheaper loans and more cash grants, while private firms enjoy larger tax breaks.
Michael Magoon • How Much Does China Subsidize Its Economy?
Scale of support: China’s government directs about 4 percent of its GDP each year toward industrial policies such as subsidies, tax breaks, low-interest loans, and cheap land.
Michael Magoon • How Much Does China Subsidize Its Economy?
Today’s summary is “ Industrial Policy in China: Quantification and Impact on Misallocation” , a working paper by the International Monetary Fund. China has long relied on industrial policy — government efforts to promote selected sectors — as a key economic strategy. This study by Daniel Garcia-Macia, Siddharth Kothari, and Yifan Tao