China has offered subsidies running in billions of dollars to state-owned firms to buy overseas factories, according to Wall Street Journal. The subsidies are part of Beijing’s pursuit of economic conquest amid trade barriers.
As Chinese invests globally, the imperfections in Chinese markets are now said to be exported to other regions.
U.S, European nations, and others subsidize their own industries through tax breaks, export financing, and research-and development funding.
China expansion overseas is seen as unique due to the huge role state-controlled firms play and its readiness to support their growth abroad.
Since the World Trade Organization rules don’t constraint subsidies in overseas operations, Chinese-owned factories outside China face lower tariffs than those in the country.
Subsidies provided by Chinese government have raised suspicions, with the U.S Congress recommending blocking acquisitions by foreign entities that get government subsidies.
The European Union has proposed legislation to control companies that have received subsidies from foreign governments.
China has defended itself over subsidies it gives its entities in foreign expansion saying the criticism is meant to curtain its economic development.
