http://www.voxeu.org/index.php?q=node/1373
China has largely reduced the scope of its production and innovation subsidies at the firm level, but some still remain. Recent research shows that such production subsidies do, on average, boost firm-level exports especially in more innovative and capital-intensive industries and especially for firms with previous export experience.
Between 1985 and 2005 subsidies amount to a total of $310 billion, $151 billion of which are directed at SOEs, with a whopping 95% of these loss-making SOE.
Over half of total subsidies are allocated to innovation and science & technology promotion funds. This is one indicator that the government is promoting innovation activities and focusing on developing firms with high-tech products with hope that it might help upgrade the industry structure and therefore enhance export performance.
