Subsidies to Chinese Industry:
State Capitalism, Business Strategy and Trade Policy by
Usha C. V. Haley and George T. Haley, Oxford University
Press, USA, April 25, 2013.
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the Economist (April 27 print edition), click on
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How Chinese Subsidies Changed the World, Harvard
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China move so swiftly in capital-intensive industries
without labor-cost or scale advantage from bit player to the
largest manufacturer and exporter in the world? This book
argues that subsidies contributed significantly to China’s
success. Industrial subsidies in key Chinese manufacturing
industries may exceed thirty percent of industrial output.
Economic theories have mostly portrayed subsidies as
distortive, inefficiently reallocating resources according
to non-market criteria. However, China’s state-capitalist
regime uses subsidies to promote the governments’ and the
Communist Party of China’s interests. Rather than
aberrations, subsidies help Chinese businesses and
governments produce, stabilize and create common
understandings of markets; the flows of capital reflect
struggles between critical Chinese actors including central
and provincial governments. Concepts of state capitalism
including market-transition theory, the multi-organizational
Chinese state, and state as paramount shareholder, create
complex and relevant understandings of Chinese subsidies.
authors develop independent measures of industrial subsidies
using publicly-reported data at firm and industry levels
from governmental and private sources. Subsidies include
free to low-cost loans, subsidies to energy (coal,
electricity, natural gas, heavy oil) and to key inputs, land
and technology. Four sequential studies identify the growth
of subsidies to Chinese manufacturing over time and effects
on world industry: steel (2000-2007), glass (2004-2008),
paper (2002-2009) and auto parts (2001-2011).
Subsidies to Chinese industry affect and are affected by
business strategy and trade policy. Business strategies
include lobbying for subsidies and for protection from
subsidized foreign competitors and managing supply chains to
guard against whiplash effects of uncoordinated subsidies.
The subsidized solar industry highlights how global business
strategies and decisions on production location and
technology development respond to production or consumption
subsidies and include market (competitive) and non-market
(political) strategies. The book also covers
government policies and regulation on subsidies broadly
focusing on domestic consumption (antidumping and
countervailing duties) and domestic production (indigenous
Subsidies to Chinese Industry
We use our understandings of state capitalism and
imperfect markets to provide a theoretically complex and
relevant explanation for industrial subsidies that in
key Chinese manufacturing industries appear in dollar
terms to exceed over thirty percent of industrial
independent measures of industrial subsidies using
publicly-reported data at company and industry levels
and from diverse sources.
other theories on business and strategic groups'
responses to trade policy, including subsidies, by
examining generic market (competitive) and nonmarket
(political) strategies that businesses may undertake.
Over the last five years, research in this book on
several industries including steel, glass, paper, auto
parts and solar has supported regulation and business
strategy both in the United States and the European