How China’s Subsidies Threaten Advanced-Technology Industries

As ITIF has documentedextensively, in the nearly 20 years since China joined the World Trade Organization, it has made innovation mercantilism a defining feature of its economic growth strategy—employing a host of tactics, from forced technology and intellectual property transfers to currency and standards manipulation. But perhaps the most pernicious and damaging element of China’s innovation mercantilism has been its aggressive industrial subsidization across a range of high-tech industries, from semiconductors and solar photovoltaics to aerospace, telecommunications equipment, and biopharmaceuticals. These subsidies disrupt the economics of market-based competition, often leading to overcapacity by propping up inefficient Chinese competitors while they earn below-market rates of return, thus depriving genuine innovators that compete on market-based terms from earning the profits they need to invest in future innovation.

ITIF hosted an event examining the extent of China’s industrial subsidies in high-tech industries and exploring available policy options to curtail these behaviors.