Trade Implications of China's Subsidies

Lorenzo Rotunno and Michele Ruta

No 2024/180, IMF Working Papers from International Monetary Fund

Abstract: 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.

Keywords: China; Domestic subsidies; International trade; Spillovers; Overcapacity; China's subsidy; trade implication; supply-chain linkage; exports of downstream industry; metal products; Exports; Export prices; Imports; Export subsidies; Global (search for similar items in EconPapers)
Pages: 43
Date: 2024-08-23
New Economics Papers: this item is included in nep-cna and nep-int
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