OECD Finds Chinese Industrial Subsidies Averaged 3-8 Times Higher Than Western Peers (2005-2024)

Chinese companies received between three and eight times more subsidies than Western firms between 2005 and 2024, according to a report published on Monday by the Organisation for Economic Co-operation and Development. The OECD report found that Chinese state subsidies have reached record levels, climbing to nearly 10 percent of company revenue in the semiconductor sector.

Chinese firms benefit from state support through grants and below-market borrowings, with the latter proving especially large.

OECD Secretary-General Mathias Cormann said large and persistent industrial subsidies can distort global markets, creating unfair competitive advantages and contributing to excess supply capacity. The report said that support is enabled by the structure of the country’s financial system, the fact that most corporate loans are issued by state banks and policy banks at rates close to China’s one-year lending benchmark.

Global state subsidies are concentrated in sectors including solar panels, semiconductors and heavy industries such as steel and aluminium.

The average aid for wind turbines stood at 1 percent of global company revenue over the 2005-2024 period. For Chinese companies, subsidies have been consistently above 2 percent over the past 15 years and exceeded 5 percent in multiple years. In semiconductors, subsidies averaged 2 percent of firm revenue globally, but for firms based in China, subsidies reached nearly 10 percent of firm revenue in 2021 and 2022.

The European Commission held an orientation debate in Brussels last week and concluded that the current state of the trade and investment relationship with China is not sustainable. The EU says some Chinese subsidies are unfair trade practices and is investigating products on a case-by-case basis.

In 2022, the EU adopted the Foreign Subsidies Regulation, allowing the Commission to probe foreign companies receiving state support when engaged in mergers or public procurement procedures in the bloc.

The OECD report was published as the EU mulls new measures to counter Beijing’s aid. The findings come as European policymakers struggle to stem a wave of low-cost Chinese imports across sectors ranging from metals and chemicals to cars and green technologies.