WTO cites a 'lack of transparency' on China's industrial subsidies

While the US and the EU remain China’s most important export markets, their share has decreased over the last three years. Other markets including Russia, India or the Middle East have filled the gap. Photo: AP/Stephen B. Morton

The World Trade Organisation (WTO) highlighted China’s “lack of transparency” on industrial subsidies, suggesting the absence of such public information is fuelling complaints from other nations about the threat of Chinese goods flooding the global economy.

Beijing’s disclosures are not complete and detailed enough “to have a clear picture of China’s support programs,” the WTO secretariat said in a trade policy review of the world’s No. 2 economy and the first such appraisal since 2021.

The report comes after recent moves by the US and the EU to erect new trade barriers against Chinese imports, arguing that Beijing’s subsidies and overcapacity have damaged their domestic industries. Canada is currently considering similar steps, while countries in South America have imposed tariffs to limit cheap imports of metal from China and Indonesia. Other nations in Asia are also considering action.

According to the WTO, China’s notifications on subsidies “do not provide information on expenditure levels in sectors where government support is likely to have global repercussions, such as aluminium, electric vehicles, solar modules, glass, shipbuilding, semiconductors, or steel.” 

The Geneva-based trade institution noted that the prevalence of Chinese state-owned companies made it hard to get a full picture of the level of government support. The WTO also criticised the authorities for not providing information on the overall endowment of the funds Beijing has set up to invest into industry.

“The incentives provided by these funds have generally not been notified to the WTO,” the report stated, adding that available estimates of the money they have available range from 1.9 trillion yuan (€239bn) to 6.5 trillion yuan.

“Given the importance of the Chinese economy and the size of government support accorded to individual companies, China’s support measures can affect global markets, downstream industries, and individual value chains,” the report said.

However, “such effects of China’s support cannot be quantified in general, as relevant data are not publicly available,” the WTO’s staff said in the report, adding that “the overall lack of transparency on China’s government support may also contribute to debates on what is perceived by some as overcapacity in certain sectors.” 

On Wednesday in Italy, trade ministers from the Group of Seven developed nations reiterated their collective crackdown on excess production, stopping short of singling out China or any other culprit.

“We will support diplomatic efforts with those contributing to overcapacity to address the issue at its source, while intensifying engagement with developing countries and emerging markets on our shared concerns on these practices,” they said in a joint statement.

In May, the Biden administration announced tariff hikes on $18bn (€16bn) worth of Chinese goods, targeting an array of imports such as semiconductors, electric vehicles and solar cells.

The EU provisionally introduced tariffs as high as 48% on EVs in the beginning of July, with definitive duties planned for November after negotiations with China.

While the US and the EU remain China’s most important export markets, their share has decreased over the last three years. Other markets including Russia, India or the Middle East have filled the gap.

- Bloomberg