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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. 

For reviews and endorsements, including from the Economist, and strategy+business click on Reviews. For media coverage of the research, including in the Wall Street Journal, Financial Times and Bloomberg BNA click on Media.  See ITIF's coverage as book that did "best job of informing the innovation and competitiveness policy debates".  See another article from the Economist on the "methodologically ground-breaking" approach employed in the book. See coverage of the research from J.P. Morgan (Appendix 1, p. 44: “in our opinion the China case has no equal in terms of scope, breadth and impact", Michael Cembalest, Chairman of Market and Investment Strategy).

For Usha Haley's testimony before the US Senate (July 10, 2013) on Shuanghui's acquisition of Smithfield Foods (widely considered the most influential hearings on FDI in a decade), click here.

Amazon.com has the book; for immediate download check the Kindle version.

Read How Chinese Subsidies Changed the World, Harvard Business Review

To contact the authors, email  info@ChinaSubsidies.com or call 1-212-208-2468

About Subsidies to Chinese Industry

How did 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.

The 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 innovation). 

Features of 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 output.
   
• We develop independent measures of industrial subsidies using publicly-reported data at company and industry levels and from diverse sources.
   
• We extend 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 Union.