Senior Fellow at Carnegie China. For speaking engagements, please write to [email protected]
Michael Pettis
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4/4
businesses and government investment rather than to household consumption, this can constitute a very large subsidy (often larger than any other) that is hard to measure.
For those interested in reading the OECD study, you can find it here:
www.oecd.org/en/publicati...
The Beijing band Carsick Cars is one of my favorites, and I thought I knew everything about them, but this well-researched piece has a lot of stuff I didn't know. For those who are interested, it is a good introduction to the development of Beijing's music scene.
open.substack.com/pub/tomaverl...
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The first and most obvious is the undervalued currency, which is the functional equivalent of a tax on imports and a subsidy for exports. Because it is hard to quantify the exact extent of the undervaluation of the RMB, most subsidy measures exclude it.
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This OECD study is likely to have an important effect on global trade discussions, but its worth noting that its measure of the extent of Chinese subsidies do not include two of the most important subsidies that drive the global competitiveness of Chinese manufacturing.
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The second is the financial subsidy. The study does try to quantify the extent to which certain manufacturers are able to borrow below "market" rates, but when the market rate itself is repressed, with nearly all credit being directed to...
Zhu Ning, finance professor at the Shanghai Advanced Institute of Finance, argues that China's housing market still hasn't bottomed out. I agree. Among other things it is still much cheaper (and less risky) to rent than to buy.
www.ft.com/content/f5f3...
Bloomberg: "Chinese banks turned net borrowers of short-term funds for the first time in seven months, increasing issuance of negotiable certificates of deposit in a sign that the liquidity glut in the financial system may be starting to normalize."
www.bloomberg.com/news/article...
Industrial subsidies have reached their highest levels since the global financial crisis, amounting to USD 108 billion in 2024 and reflecting governments’ renewed interest for industrial policy in a c...
www.oecd.org
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Financial Times: "A company-level OECD analysis of government subsidies across 15 key industrial sectors found that nearly 60 per cent of Chinese firms’ global market share gains since 2005 could be attributed to subsidies."
www.ft.com/content/885c...
