In this article, we delve into the intricate landscape of subsidies offered by the Chinese government on both national and local levels. While industrial subsidies often garner the most attention, it’s important to note that significant resources are also allocated to disaster relief, social welfare, and, quite surprisingly, agriculture, which receives the largest total subsidies.
By Shuhui Xiang, PhD candidate Geneva Graduate Institute, Xinran Yin, and Yuan Zi, Assistant Professor in Economics Geneva Graduate Institute. Originally published at VoxEU
China’s industrial policy stands at the forefront of global trade discussions, yet concrete evidence regarding the specifics of its subsidy framework is scarce. This column presents five critical insights from a fresh database tracking China’s WTO subsidy notifications from 2001 to 2022: (1) direct fiscal support has remained stable at around 0.8% of GDP since 2008; (2) China utilizes subsidies actively with remarkable policy consistency; (3) support for foreign direct investment (FDI) has diminished, while industry-specific and innovation-centered assistance has increased; (4) wealthier and more open provinces offer greater local subsidies; and (5) while agriculture dominates by value, manufacturing subsidies are relatively modest. These trends illustrate the evolution of China’s subsidy strategy from attracting foreign capital to prioritizing technological self-reliance.
China’s ascent as a manufacturing giant has fueled ongoing debates regarding government intervention (e.g., Aghion et al. 2015). While some policies, such as tariffs and FDI regulations, are well-documented, thorough evidence of China’s broader industrial subsidy structure has often been elusive. This lack of clarity matters significantly: subsidies are amongst the most direct levers for governments to influence economic activity. Understanding China’s approach is crucial not only for trade and development policies but also for discussions on geopolitics, industrial competition, and technology security.
In our recent study (Xiang et al. 2025), we address this gap by digitizing and analyzing China’s official subsidy notifications sent to the WTO from 2001 to 2022. This database, the first systematic and authoritative compilation of Chinese industrial subsidies, includes 1,256 unique programs—260 at the central level and 996 at the local level—covering direct financial appropriations, grants, interest subsidies, and tax incentives. After cross-referencing these notifications with original domestic documents, we present five significant findings.
Fact 1: Growing Subsidy Incidence with Stabilized Direct Fiscal Support
The incidence of subsidies in China has expanded over time, with active programs increasing from 85 in 2001 to 446 in 2022. However, the noticeable rise after 2015 primarily reflects a change in reporting methods, as China began including sub-central programs in response to an EU request. Still, local subsidies make up only a small fraction of central government support (Figure 1a).
Inspecting the trajectory of subsidy values provides more insightful trends, as illustrated in Figure 1b. Direct fiscal support climbed sharply after 2004—coinciding with an expansion of rural support policies—peaking around 2008 and stabilizing at roughly 0.8% of GDP since then. This figure aligns broadly with OECD estimates, indicating that while China remains a significant user of subsidies, direct budgetary support has not escalated.
Figure 1 Annual trends in Chinese subsidies
Note: Panel (a) presents the yearly count of central and, from 2015 onwards, local subsidies. Panel (b) illustrates their total value, with the line chart representing subsidy values as a share of GDP (right axis).
Fact 2: China’s Subsidy Practices Exceed Development Expectations
As depicted in Figure 2a, when placing subsidy notifications from various WTO members against GDP per capita data from 2019 to 2020, China (alongside the US) exhibits a striking pattern: it employs far more subsidy programs than its income levels would predict.
While less developed nations may underreport their subsidy practices, the remarkable persistence of Chinese programs is noteworthy, as visualized in Figure 2b. On average, central subsidy programs last over a decade, with around 10% enduring for 20 years or longer. This durability reflects a sustained investment approach, suggesting strong institutional commitment and a continuity of policy across political changes.
Figure 2 Duration and number of subsidies
Note: Panel (a) plots the number of subsidies against GDP per capita in 2019, with variables shown on a logarithmic scale and axis labels reported in levels. Panel (b) plots the duration of Chinese central subsidy programs active between 2001 and 2022.
Fact 3: A Shift from FDI Promotion to Technological Independence
The focus of China’s subsidies has undergone significant changes over the past two decades. As shown in Figure 3, programs aimed at promoting foreign direct investment accounted for nearly 10% of central government subsidies in 2001 but had decreased to just 3.3% by 2022. Meanwhile, the share of industry-specific subsidies has more than doubled, rising from 7.9% to 16.3% during the same time frame. Innovation and technology have consistently garnered substantial support.
Figure 3 Changes in objectives, 2001 vs 2022
Note: Panels (a) and (b) report central government subsidy incidence in 2001 and 2022, respectively. Percentages indicate the share of each objective out of total subsidies for the corresponding year and government level.
This reallocation underscores China’s strategic pivot from trade and FDI liberalization to an emphasis on technological self-sufficiency and industrial sovereignty. This transition suggests that the earlier openness to foreign investment was more of a phase in development rather than a permanent objective. The timing and scale of this shift not only respond to, but also help explain, intensifying trade and technology conflicts with Western nations.
Fact 4: Wealthier, More Export-Oriented Provinces Provide More Subsidies
The dataset allows us to investigate sub-central subsidies that have been reported since 2015. Findings in Figure 4 show that wealthier and more trade-oriented provinces allocate significantly more local government support. This trend indicates that local subsidies may reinforce, rather than mitigate, regional inequalities within China. It reflects broader fiscal disparities, as the richest regions spend several times more per capita than their poorer counterparts.
Figure 4 Number of subsidies and local government indicators
Note: Panel (a) plots the average number of subsidies (2015–2022) against average GDP per capita (2010–2014), while Panel (b) does so against trade openness across 31 provinces. Both variables are displayed on a logarithmic scale with pre-log axis labels.
Fact 5: Agriculture Leads in Subsidy Value
Lastly, Figure 5 illustrates the stark differences that arise when measuring subsidies by count compared to value. While scientific research, agriculture, and manufacturing have the highest counts of subsidized programs, the value distribution tells a different story. Agriculture dominates, receiving nearly 40 trillion RMB over 21 years—about 47% of total funds. Construction ranks second, reflecting China’s significant focus on infrastructure investment.
Figure 5 Subsidies by sectors
Note: Panel (a) reports each sector’s share of the total number of subsidies, while Panel (b) indicates each sector’s share of total subsidy value.
Significantly, direct manufacturing subsidies are relatively modest in both total value and per-program outcomes. On average, a manufacturing subsidy is less than twice the value of a research and development subsidy and merely one-twentieth the value of an agricultural subsidy. This decentralized and small-scale support for manufacturing contrasts with the dominant perception of significant ‘big push’ interventions. Instead, this approach aligns more closely with contemporary research emphasizing incremental strategies for technological advancement (Juhász et al. 2024) and adaptable policy frameworks (Bloom et al. 2019).
Conclusion
The analysis of China’s official subsidy notifications provides a more detailed understanding than often represented in policy discussions. While China actively engages in industrial subsidies, direct fiscal support has stabilized since 2008, and the strategic focus has shifted from attracting foreign investment to fostering domestic innovation and technology capabilities. Contrary to popular belief, manufacturing subsidies are modest and decentralized.
These findings have significant implications for trade policies and development economics. For trading partners concerned about Chinese subsidies, this data suggests a focus on the evolving objectives behind these supports rather than merely their scale. For developing countries looking to emulate China’s model, the evidence indicates a preference for sustained, flexible approaches as opposed to one-time interventions.
We believe this database, in conjunction with other recent research efforts (Juhász et al. 2022, Fang et al. 2025), will foster further exploration into industrial policy, including comparative studies with other nations and systematic evaluations of subsidy effectiveness.
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