RIETI Report April 10, 2026

Subsidising the supply chain: How China’s industrial policy shapes export competitiveness

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Dear Readers,

Welcome to RIETI Report. This bi-weekly newsletter will keep you updated with the recent columns, event information and research results by RIETI fellows and other leading economists in Japan and around the world.

In this edition, we are featuring topics related to industrial policy and economic networks. As industrial policy returns to the global mainstream, governments are expanding subsidies in the name of economic security. In their latest column, RIETI Senior Fellow Dr. Hongyong Zhang and his co-authors present new evidence from China that the knock-on effects of subsidies extend far beyond individual firms, travelling through supply chains. Their analysis highlights the importance of understanding such policies as a networked process.

We hope you will enjoy it. If you have any feedback, we would love to hear from you (news-info@rieti.go.jp).
Editors of RIETI Report (Facebook: @en.RIETI / X: @RIETIenglish / URL: https://www.rieti.go.jp/en/)

This month's featured article

Subsidising the supply chain: How China’s industrial policy shapes export competitiveness

CHENG WenyinEconomist at Asian Development Bank

LIANG DavidPhD candidate in Economics, Institute of Economic Research at Hitotsubashi University, Research Fellow

MENG BoSenior Researcher at Japan’s Institute of Developing Economies

ZHANG HongyongSenior Fellow, RIETI

As governments expand industrial subsidies in the name of economic security, debate intensifies over whether such policies distort trade or enhance competitiveness. This column presents new evidence from China showing that subsidies do more than support individual firms – they ripple through domestic supply chains, boosting downstream exports and product quality. Industrial policy, it turns out, travels along value chains.

As industrial policy makes a global comeback, concerns about subsidies and trade distortions have intensified. The US Trade Representative (2024) argues that China’s subsidies harm foreign industries and may violate WTO rules. Meanwhile, Chinese policymakers maintain that such measures are legitimate and non-distortionary. At the same time, advanced economies are expanding their own subsidy programmes – from the US CHIPS and Science Act to Europe’s Net-Zero Industry Act. This renewed activism raises a fundamental question: Do industrial subsidies enhance international competitiveness, and if so, through what channels?

>>>To download full text:
https://www.rieti.go.jp/en/columns/v01_0237.html

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