The Spillover Effect of US Industrial Subsidies on China’s Exports

• Main Authors: Yanfeng Lou, Yezhuang Tian, Kai Wang
• Format: Article
• Language: English
• Published: MDPI AG 2020-04-01
• Series: Sustainability
• Subjects: industrial subsidy; export trade; spillover effect; instrumental variable
• Online Access: https://www.mdpi.com/2071-1050/12/7/2938

This study systematically assessed the spillover effects of US industrial subsidy policies on China’s export by matching all related bills issued by the US federal and state governments since 2009 with the affected products exported from China. In general, the US subsidy policies created a significant obstacle for Chinese exporters entering the US market. In addition, the industry-level analysis indicated that the subsidy policy has the most significant negative spillover effect on mid- and high-tech products, and no significant impact on resource-based and low-tech export products. Furthermore, we explored the mechanism and found that the US subsidies lower the domestic export prices of the affected products, thereby having a larger negative impact on the entry of mid- and high-tech products entering the US market. The implementation of the US subsidy increased the export competitiveness of mid- and high-tech products in domestic market, which helped such US firms expand their international markets. Therefore, we offer targeted suggestions in order to create a fair and reasonable business environment for Chinese exporters.