A study conducted by the Kiel Institute for the World Economy (IFW Kiel) has pinpointed BYD, a company also expanding its operations internationally, as the predominant beneficiary of state incentives in China, receiving a hefty amount of financial support.
According to the research from the German institute, the Beijing government heavily backs its domestic industry, with special focus areas such as green technologies, electric mobility, and wind energy. Among the primary beneficiaries is BYD, which has received at least 3.4 billion euros in direct state subsidies.
The study highlights that the financial support by the Chinese government to BYD significantly swelled from 220 million euros in 2020 to 2.1 billion euros by just two years later. This resulted in direct subsidies accounting for 1.1% of the company's business revenues in 2020, which escalated to 3.5% in 2022. BYD, in particular, benefits from more purchase premiums for its electric vehicles compared to other domestic manufacturers, such as GAC, or foreign companies producing locally, like
Tesla or Volkswagen's joint ventures.
Additionally, combined with other supportive measures such as easier access to critical raw materials, technology transfer enforced by foreign investors and favorable treatment in procurement and administrative procedures, Chinese companies have rapidly expanded their dominance in the green technology sectors. They now not only dominate the Chinese market but are also increasingly penetrating EU markets.
The research by IFW Kiel pointed out that virtually all Chinese companies listed on the stock market received direct subsidies in 2022, with special mention of the support for companies involved in wind and solar energy. The level of support provided to the Chinese industry is "at least three to four times higher" than that in major EU and OECD countries, the report states.
In response, the European Union has initiated a 40 billion euro innovation fund to compete with China. However, it is also contending with protectionist measures from the US market. In October 2023, the European Commission launched an investigation to determine if the Chinese subsidies to companies like BYD, SAIC, and Geely provided the country's industry with an unfair advantage.
China has criticized the investigation into its subsidies as antithetical to free-market principles, arguing that its automotive manufacturers are winning in the electric vehicle market due to superior products. According to Chinese Commerce Minister Wang Wentao, speaking in Paris on Sunday, Chinese electric vehicle manufacturers rely more on "continuous technological innovation" and advanced domestic supply chains than on governmental support.
Dirk Dohse, one of the co-authors of the report, sees German Chancellor Olaf Scholz’s upcoming visit to China next week as an "excellent opportunity" for discussions with Beijing regarding the subsidies.