IMF Working Papers

Trade Implications of China's Subsidies

By Lorenzo Rotunno, Michele Ruta

August 23, 2024

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Lorenzo Rotunno, and Michele Ruta. "Trade Implications of China's Subsidies", IMF Working Papers 2024, 180 (2024), accessed November 21, 2024, https://doi.org/10.5089/9798400282478.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Available data show a marked increase in subsidy utilization in China and in other major economies between 2009 and 2022. In this paper, we investigate the effects that China's subsidies have on international trade flows at the product level over this period. The results indicate that the subsidies promoted Chinese exports and limited imports. These effects have been magnified by supply-chain linkages: subsidies given to upstream industries expand significantly the exports of downstream industries. Additional analysis of the price and quantity effects at the product level shows that China's subsidies lowered export prices and boosted export quantities in certain sectors such as metal products, furniture and autos, but not in others such as electrical machinery where the evidence is more consistent with quality upgrading.

Subject: Export prices, Export subsidies, Exports, Imports, International trade, Prices, Trade balance

Keywords: China, Domestic subsidies, Export prices, Export subsidies, Exports, Global, Imports, International trade, Overcapacity, Spillovers, Trade balance

Publication Details

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