How is the money used?
As an important means for effective intervention and regulation of social and economic life, government subsidies are in fact practiced worldwide. In market economies, both developed and less-developed, subsidies exist either as fiscal policy or pricing policy.
In China, the wide range of subsidies can be divided into three major categories, most of which are indirectly offered to domestic producers and exporters. These include tax rebates, financial funding and compensatory revenue.
Tax rebates are not only for exporting enterprises but also for domestic ones. For example, if a company purchases homemade equipment, it may get tax rebates for the corporate income tax it has paid, a move to support domestic technology.
What foreign countries have focused on mostly is the tax rebate policy for exporting enterprises implemented in 1985, a move to boost the country's exports. But since 2007, the government has modified such policies according to WTO rules.
Other types are mainly price subsidies that are macro regulative expenditures, a means by which the government regulates revenues and stabilizes the prices of such things as grain, textiles, meat and edible oil.
Enterprises adjust mentality when facing probes
This year the U.S. government has notified the WTO of nearly 200 Chinese subsidy programs, saying many of them may violate free trade rules, reported The New York Times in October.
When facing such claims in the past, most Chinese enterprises did not make much effort to react, but they are now studying the WTO's rules and trying to protect their rights resolutely. In recent years, small- and medium-sized enterprises have chosen to cooperate with one another rather than stand alone when facing such accusations.
For example, Yekalon Industry Inc., a modernized export corporation that specializes in the manufacturing and distribution of building decoration materials, succeeded in defending its self-developed locking technology for laminate and wood floorings after the Unilin Group sued it for patent infringement in Toronto in 2009 and 2011.
Meanwhile, the Chinese government is also taking concrete measures to protect its corporate interests. This year, the government submitted a report to the WTO to clear doubts over the alleged subsidies, an active move against what it calls unreasonable and discriminatory countervailing duty regulations.
