Cover IMF Working Papers
Trade Implications of China's Subsidies
Author: Lorenzo Rotunno and Michele Ruta
Series:
IMF Working Papers
Volume/Issue:
Volume 2024: Issue 180
Language:
English
Publication Date:
23 Aug 2024
DOI:
https://doi.org/10.5089/9798400282478.001
ISBN:
9798400282478
ISSN:
1018-5941
Pages:
43
Keywords:
China; Domestic subsidies; International trade; Spillovers; Overcapacity
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Available data show a marked increase in subsidy utilization in China and in other major economies between 2009 and 2022. In this paper, we investigate the effects that China's subsidies have on international trade flows at the product level over this period. The results indicate that the subsidies promoted Chinese exports and limited imports. These effects have been magnified by supply-chain linkages: subsidies given to upstream industries expand significantly the exports of downstream industries. Additional analysis of the price and quantity effects at the product level shows that China's subsidies lowered export prices and boosted export quantities in certain sectors such as metal products, furniture and autos, but not in others such as electrical machinery where the evidence is more consistent with quality upgrading.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund