Subsidies to Chinese Industry: State Capitalism, Business Strategy, and Trade Policy

Hardcover | April 2, 2013

byUsha C.V. Haley, George T. Haley

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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 Chinesemanufacturing 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 theCommunist 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 includingmarket-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 andtechnology. 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. Thesubsidized 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 andregulation on subsidies broadly focusing on domestic consumption (antidumping and countervailing duties) and domestic production (indigenous innovation).

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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 Chinesemanufacturing industries may exceed thirty percent of...

Usha Haley is Professor of International Business at Massey University, Auckland, New Zealand and Research Associate at the Economic Policy Institute, Washington, DC. George Haley is Professor of Marketing and International Business, and Director of the Center for International Industry Competitiveness at the University of New Haven.

other books by Usha C.V. Haley

Format:HardcoverDimensions:240 pages, 9.25 × 6.12 × 0.98 inPublished:April 2, 2013Publisher:Oxford University PressLanguage:English

The following ISBNs are associated with this title:

ISBN - 10:0199773742

ISBN - 13:9780199773749

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Table of Contents

Preface: Contributions, Chapter Outlines, Acknowledgements1. The Hidden Advantage of Chinese Subsidies2. Measuring Subsidies to Chinese Industry3. Steely Commitment: Subsidies to China's Steel Industry4. Through the Looking Glass: Subsidies to China's Glass Industry5. No Paper Tiger: Subsidies to China's Paper Industry6. Pedal to the Metal: Subsidies to China's Auto-Parts Industry7. Subsidies, Business Strategy and Trade PolicyBibliographyAppendix Four letters: 3 from US Congress and one from the US White House