China's competitiveness outpaces subsidies, OECD report finds

Chinese firms have achieved global leadership in sectors once thought to be the domain of advanced economies, including electric vehicles, batteries, industrial robots, solar panels and artificial intelligence. While the common narrative attributes this success to state subsidies, a new OECD report argues that subsidies are no longer the primary driver.

The report criticises the methodology that treats loans priced below China’s Loan Prime Rate (around 3.5%) as subsidised, noting that this rate is close to average commercial lending rates and therefore not a preferential policy tool. Data from more than 5,300 listed non‑financial Chinese firms show that most bank financing still goes to state‑owned enterprises in traditional sectors, whereas the most competitive companies rely increasingly on retained earnings, equity financing and capital‑market funding.

Subsidy intensity among new‑economy firms fell sharply between 2023 and 2025 as local‑government debt limited regional support and the central government pushed for a unified national market, curbing local protectionism. The report also points out that the recent rise in China’s current‑account surplus reflects a domestic slowdown in investment after the property downturn, combined with higher household saving, rather than an intentional export‑led strategy.