Claims state subsidies caused China’s industrial overcapacity a deliberate smear: scholar

Western narratives alleging state subsidies caused China’s industrial overcapacity are a deliberate attempt to smear the country and not tenable in the face of solid data and facts, a Chinese scholar said.

Writing in a commentary published on Tuesday in the Communist Party mouthpiece People’s Daily, Cui Fan, an international trade professor at the University of International Business and Economics in Beijing, argued that “industrial subsidies do not inherently lead to excess capacity”.

“Reasonable industrial subsidies aimed at addressing market failures and supporting emerging industries are a globally recognised and legitimate policy tool,” Cui said.

Instead, he warned that the real concern was “discriminatory subsidies that violate World Trade Organization rules”.

Cui cited research by the University of British Columbia covering the period from 2009 to 2020 that showed major economies such as Germany, Japan, Brazil and the United States implemented industrial policies – defined as state actions like tariffs and subsidies aimed at shaping national economic activity – far more frequently than China, which ranked 11th despite being the world’s second-largest economy.

“The international competitiveness of Chinese industries stems from internal demand backed by a vast domestic market, a complete industrial supply chain, and a deep technical talent pool built over time,” Cui said. “Simply attributing competitive advantages to subsidies lacks empirical support and runs counter to basic common sense regarding industrial development.”