A New China Shock? The Untold Story of China’s R&D Subsidies

Paper / Publisher: ZEW - Leibniz Centre for European Economic Research (Mannheim):
A New China Shock? The Untold Story of China’s R&D Subsidies

How effective have China’s R&D subsidies been in increasing Chinese firms’ R&D expenditures and subsequently firm performance? Dr. Philipp Boeing and Prof. Dr. Bettina Peters (both ZEW Mannheim) find "that the policy design would have been effective without misappropriation and would have stimulated firm’s total R&D expenditures by more than the assigned R&D subsidy (an outcome known as 'additionality').

From an international perspective, foreign businesses and governments should be concerned aboutthe misuse of R&D subsidies for areas unrelated to the official funding purpose. Importantly, we find that some part of misused R&D subsidies is going into physical assets. Undetected misappropriation may allow Chinese firms to cross-subsidize non-research activities below the radar of (foreign) competition regulators, increasing the likelihood of unfair competition at home and abroad. Preventing the misuse of R&D subsidies not only supports fair competition; it is also in the interest of Chinese policymakers to  unleash the full efficacy oftheir R&D policy. If China’s most recent plans can indeed increase the policy’s 'bang for the buck', Chinese firms will emerge as increasingly innovative competitors, and foreign firms are likely to perceive China as a more attractive location for global R&D operations." (...)

Read more:
ZEW Expert Brief (No 10, Nov 21): here

Hören Sie dazu auch den ZEW-Podcast (Folge 14):
Zweckentfremdung von F&E-Subventionen in China hier