Thursday, April 14, 2016

China Ends Subsidy Program

China is ending its most controversial export subsidies, according to a Reuters article that cites U.S. sources, “U.S. says China to end export subsidies in seven sectors.”

. . . China had agreed to end a program known as its "demonstration bases-common service platform" . . .

The Chinese industries that have received the subsidies under the program include textiles, light industry, specialty chemicals, medical products, hardware, agriculture and advanced materials and metals, including specialty steel and aluminum products . . .

Export subsidies can help to increase capacity and employment in specific sectors, but at the same time they put downward pressure on wages. They are generally harmful to an economy if carried on for an extended period or on too large a scale. Export subsidies can also fail if other countries enact retaliatory tariffs, and this becomes more likely than not if subsidies are carried on beyond an initial year or two.

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