China increased its subsidies to domestically listed companies to a record level last year to help them weather a slowdown in the world’s second-largest economy, in a move likely to further strain trade talks with Washington. Payments by Beijing and local governments to listed companies rose 14 per cent year on year to Rmb153.8bn ($22.3bn) in 2018, according to corporate earnings data collected by financial database Wind. “This data just reinforces the impression that Chinese companies start the race for business far ahead of their competitors,” said Scott Kennedy, director of the project on Chinese business and political economy at the Center for Strategic and International Studies in Washington. He said the disclosed payments exclude “a range of implicit subsidies and other non-tariff barriers”.
China’s economy expanded at 6.6 percent last year, its slowest rate in almost three decades, because of weak credit growth and the worsening trade war with the US. US president Donald Trump this month increased tariffs on $2oobn Chinese goods and placed telecoms equipment maker Huawei, the country’s corporate champion, on a crippling export blacklist.
As part of their trade talks, Washington is trying to force Beijing to dismantle state support for the corporate sector that the US argues leads to overcapacity and gives Chinese companies an unfair advantage in global markets.
“There were many measures applied last year to support the economy and subsidies were one part,” said Xu Bin, a professor at the China Europe International Business School in Shanghai, adding that the payments aimed “to offset losses companies suffer in an adverse global economic environment”.