Last year, the Chinese Communist Party subsidized semiconductor and military companies by more than 100 billion yuan.
In order to compete with the U.S. in technology, the Chinese Communist government is subsidizing key industries such as semiconductors and defense by more than 100 million yuan in 2020.
Taiwan’s Science and Technology Newsline reported on May 17, citing the Nihon Keizai Shimbun, that information compiled from earnings data of listed companies obtained from information company Wind shows that the Chinese Communist government subsidized key industries such as semiconductors and defense by RMB 213.6 billion in 2020. The figure represents a 14 percent increase compared to 2019, with subsidies paid to 113 semiconductor companies totaling 10.6 billion yuan, 12 times more than 10 years ago.
According to the report, this reflects the Chinese Communist authorities’ attempts to compete with the United States in technology. In response, the U.S. Biden administration is also considering investing $50 billion to foster the chip industry. But the move has sparked market concerns that the subsidy race may hinder fair competition.
China’s largest fab, SMIC, has received $2.25 billion in financing from two Communist Party of China government support funds, plus nearly 2.5 billion yuan in additional funding. SMIC plans to spend $2.35 billion to build a new fab in Shenzhen.
Beijing authorities are also subsidizing chip equipment manufacturers such as North China and Advanced Micro Semiconductor Equipment as machinery shortages pose a challenge to China’s domestic production targets.
According to IC Insights forecast, although China’s chip industry is developing slowly, by 2025, China’s domestic manufacturing of semiconductors will account for 19.4% of total Chinese domestic demand.
The Chinese Communist authorities are also spending some of the money on advanced key military technologies, including shipbuilder China Shipbuilding Group, Shenyang Aircraft Industry Group, which builds fighter jets, and Beidou Xingtong, which is responsible for the Chinese version of the global navigation and positioning system, the report said.
In addition, subsidies to the pharmaceutical industry, such as Kangxinuo Bio, which develops and produces the Chinese Communist Party’s virus vaccine, and Shanghai Pharmaceutical, have also risen sharply.
Of the 4,290 companies counted, 4,230, or nearly 98 percent, said they had received subsidies, with 10 percent of them receiving more than 100 million RMB.
According to the report, the Chinese Communist Party has been using subsidies and low-interest loans to foster domestic industries, and such spending increased dramatically during the Communist Party’s virus epidemic. Data show that state-owned enterprises, which account for only one-third of listed companies, collect about 60 percent of the money, indicating that China’s playing field is quite uneven.
Many countries support their industries, and the World Trade Organization (WTO) does not ban all subsidies, but it does ban subsidies that promote exports or expand domestic production, the report said.
According to Shinichi Seki, a senior economist specializing in China, the central government of the Communist Party of China has not yet grasped the scope of subsidies for local governments, and this lack of transparency could eventually lead to overcapacity if only to maintain employment and economic development.
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