China is very clear about how to win the technology race over the rest of the world: with tons of public money

China has insisted on being the first world power. This declaration of intentions can be as empty as every January 1st when I say that this year I will start waking up at six in the morning to go for a run, or the opposite can happen: that they put all the means at their disposal to achieve it. In the case of the Asian giant, what is happening is the second.

The Five-Year Plan is the roadmap that the Gogovernment sets every five years and that indicates the direction that both public institutions and private companies must follow to achieve the country's objective. And with a defined objective, there is only one pending issue: the question of financing.

And, in the case of China, that translates into a government impulse that other countries do not have.

A competition at two speeds

OECD stands for Organization for Economic Cooperation and Development. It is made up of 38 States, including North Americans, some South Americans, many Europeans, Australia and Japan.

China is not among those countries (nor among the candidates to join), but the OECD has just published a quite interesting report that alludes directly to the Asian giant.

The organization has something called the MAGIC Industrial Subsidies Database, a tool that tracks the support received by the world's 525 largest manufacturing companies.

In the latest report, they have realized something: around 60% of Chinese companies' global market share gains over the past two decades can be linked directly to government subsidies.

This report comes at a time when relations between China and the rest of the powers remain at a delicate point. Recent trips by US representatives to 'open borders' have attempted to ease tensions, but the trade war is still there, as is the technology war and, in addition, now the European Union is taking measures to restrict imports of goods heavily subsidized by the Chinese government.

The problem is that it is difficult to escape from these heavily subsidized companies. As the report points out, total subsidies in the 15 sectors analyzed were about $108 billion in 2024. It is the second highest level recorded in recent decades, only surpassed by the peak that occurred during the 2008 financial crisis.

It is estimated that this amount is equivalent to 1.3% of the companies' income and that, although they helped the beneficiaries gain market share, they did not translate into improvements in productivity or profitability. That is, thanks to subsidies, a company was able to expand, but it did not automatically improve its processes.

As I said at the beginning of the text, China has set the goal of leading in key technological sectors such as chips or renewables. At Xataka we continually talk about current technology and in recent years it has been impossible to leave China out of the equation in these sectors due to the momentum that its companies are taking.

And, precisely, the OECD document reflects that the sectors that received the most government support were aluminum, steel, shipbuilding, semiconductors and solar panels. In steel and aluminum, China is another undisputed power and, in addition, its naval industry is at its maximum thanks to its military muscle.

Beyond pointing out the obvious, the OECD sends a message about how these industrial subsidies can distort global markets. It is a practice that creates “unfair competitive advantages and contributes to excess supply capacity,” according to Mathias Cormann, Secretary General of the OECD.

He also offers advice: design specific industrial policies to ensure the growth of the rest of the markets and weave a network of systems that make global trade fairer.

Images | jo.sau