[tooltalk]

> Allowing in Chinese EVs into markets where there are important domestic auto manufacturers will be very bad for those domestic manufacturers.

I want a level playing field/market competition. Allowing China's illegal subsidies and anti-market tactics to dominate the global EV industry is very dangerous, which is why they are already countervailed in many developed countries.

Subsidies aren't necessarily bad, but it's become China's choice of blunt instrument to price out/drive out foreign competition.

[DiogenesKynikos]

China's EV subsidies are basically identical to US and EU subsidies. They offer tax credits and other perks to customers, just like in Western countries.

Subsidies are not the reason why China's EVs are cheap. The reason is that China has a much more competitive EV market than the US or EU. There are many manufacturers that are competing with one another, the charging infrastructure is much better than in the West, and Chinese cities heavily discourage internal combustion engine vehicles.

> Subsidies aren't necessarily bad, but it's become China's choice of blunt instrument to price out/drive out foreign competition.

China specifically encouraged foreign car companies to enter its market, most recently Tesla (which has done very well in China). Allowing foreign car companies to compete in the Chinese market was a major part of China's strategy to improve its own domestic manufacturing.

[chermi]

Subsidies are part of the reason. Definitely not the whole reason, but part of it The Chinese provinces pump a bunch of money in to try to make their region's car manufacturers succeed. And every province is doing it. So you have a bunch of carmakers competing for market while being kept alive, so they do the most rational thing possible to gain share: lower prices.

Of course, they're also just good at building things since they do so much of it. And cheaper labor. Much better supply chain.

[acdha]

Do you have any figures on the degree of subsidy? The impression I’ve gotten over the last year or so is that China has been phasing out their subsidies, which also went to companies like Tesla and Stellantis, and the main shift recently was the Make Smog Great Again bill over the summer setting the US back a generation which isn’t really a criticism of Chinese industrial policy.

https://www.bcg.com/publications/2025/ev-strategies-in-us-eu...

https://www.scmp.com/economy/china-economy/article/3322666/c...

[tooltalk]

> China's EV subsidies are basically identical to US and EU subsidies.

Not really, not much similarities between China and EU subsidies past 15 years. China's NEV subsidies are illegal because they are either conditioned on illegal tech transfer, local content requirement, or restrict market access. To give a high level view of the problems:

1) forced technology transfer/IP theft -- all foreign automakers/EV battery producers forced to give up IP to access China's market (and subsidies). This was litigated before the WTO by the EU in 2018 (see WT/DS549):

  Hybrid in a Trade Squeeze, Keith Bradsher, Sept 5, 2011, NYT

  ... The Chinese government is refusing to let the Volt qualify for subsidies totaling up to $19,300 a car unless G.M. agrees to transfer the engineering secrets for one of the Volt’s three main technologies to a joint venture in China with a Chinese automaker, G.M. officials said.

2) Once foreign battery producers made IPR/IP concessions to access China's growing EV market and significant investment in battery production in China, they were effectively banned. All domestic, foreign automakers were likewise forced to switch to local champions, namely CATL/BYD, promoted by the gov't under MIIT's 2015 Regulation on Power Standard:

  Power Play, Trefor Moss, May 17, 2018, WSJ

  ... China requires auto makers to use batteries from one of its approved suppliers if they want to be cleared to mass-produce electric cars and plug-in hybrids and to qualify for subsidies. These suppliers are all Chinese, so such global leaders as South Korea’s LG Chem Ltd and Japan’s Panasonic Corp. are excluded.
  ... Foreign batteries aren’t officially banned in China, but auto executives say that since 2016 they have been warned by government officials that they must use Chinese batteries in their China-built cars, or face repercussions. That has forced them to spend millions of dollars to redesign cars to work with inferior Chinese batteries, they say.
  ... “We want to comply, and we have to comply,” said one executive with a foreign car maker. “There’s no other option.”

3) China also made sure no Chinese consumers had access to EVs with batteries from foreign EV battery producers effectively creating a captive market of buyers for CATL/BYD.

  Why a Chinese Company Dominates Electric Car Batteries. Keith Bradsher and Michael Forsythe, Dec 22, 2021, NYT

  The government soon said electric car buyers could get subsidies only if the battery was made by a Chinese company. G.M., which had not been notified of the rule, started shipping Buick Velite electric cars in 2016 with batteries made in China by LG, a South Korean company.
  Angry consumers and dealers complained that local officials were denying them subsidies, people familiar with the episode said. G.M. switched heavily to CATL for the huge Chinese market.

4) another fairly recent example of China's arbitrary regulatory barriers to keep out foreign competition, which was later dropped after the gov't found out their local "champion," CATL, couldn't pass the EV battery safety test:

  Why a Chinese Company Dominates Electric Car Batteries.
  ... A rival had released a video suggesting that a technology used by the company, CATL, and other manufacturers could cause car fires. Imitating a Chinese government safety test, the rival had driven a nail through a battery cell, one of many in a typical electric car battery. The cell exploded in a fireball.
  Chinese officials took swift action — by dropping the nail test, according to documents reviewed by The New York Times. The new regulation, released two months later, listed who had drafted it: First on the list, ahead of the government’s own vehicle testing agency, was CATL.

So these are very deliberately orchestrated mercantile policies to gain advantages with forced tech transfer, limited foreign competition, and subsidized overcapacity and export subsidies. It's just too bad that the existing global trade/subsidies regulation regime, aka, the WTO, doesn't have much effective enforcement tool to discourage/punish such behavior. EU's shortcoming IMO is their blind faith in the market and their belief that the market would autocorrect.

As of this week, EU has over 100+ countervailing measures (anti-dumping/anti-subsidy) in force against Chinese imports, ranging from ceramic tiles (AD560), to decor paper (AD712), to polyester yarn (AD690); in addition to few more dozens of on-going investigations from candles (AD726) to hardwood plywood (AD717).

[DiogenesKynikos]

> forced technology transfer/IP theft

Your example of this is from 2011. Chinese joint venture / technology transfer requirements in the automobile sector were eliminated several years ago.

This was a policy that was enacted when China first opened up. It was a fair deal: foreign companies got to exploit cheap Chinese labor, and in return, they transferred some IP to China. However, that IP transfer was never enough to make Chinese cars internationally competitive. Only the development of EVs - where China is the biggest R&D spender in the world - allowed China to leapfrog foreign manufacturers.

You also raise domestic component requirements to qualify for subsidies. The US does exactly the same thing.

> So these are very deliberately orchestrated mercantile policies to gain advantages with forced tech transfer, limited foreign competition, and subsidized overcapacity and export subsidies.

The problems with this explanation are:

1. China leads in EV R&D. Chalking up its dominance to theft of foreign IP doesn't make any sense.

2. China specifically invited Tesla to enter the country, and showered it with subsidies. As a result, Tesla has done very well in China. The foreign companies that are losing market share in China are the ones that missed the EV transition. VW dominated the Chinese auto market until just a few years ago. Now, it's heading to 0% market share. Why? It didn't focus on EVs.

3. China is not dumping its "excess capacity." Chinese companies are selling their cars in foreign markets at a substantial markup, and netting large profit margins in foreign markets. That's the opposite of how dumping works.

> As of this week, EU has over 100+ countervailing measures

This was a purely political decision. Automobile manufacturers in France were scared of Chinese competition and demanded protectionist measures. The Germans opposed the measures, because they sell lots of things in China and don't want to get into a trade war. The French won that fight at the EU level.

[tooltalk]

> Your example of this is from 2011.

Sure, I'm giving you a chronological high level view of China's illegal practices past 15 years when China's NEV subsidies programs started.

> Chinese joint venture / technology transfer requirements in the automobile sector were eliminated several years ago.

This was never allowed and China upon China's 2001 Accession were required to phase them out 15 years ago, which China never did.

> You also raise domestic component requirements to qualify for subsidies. The US does exactly the same thing.

Sure, Biden's IRA passed in 2022 is a counter measure against China's domestic sourcing requirement since 2015.

> 1. China leads in EV R&D. Chalking up its dominance to theft of foreign IP doesn't make any sense.

False. Most, or close to 80% of all ACTIVE lithium ion battery patents are held by Japan and South Korea. The lithium ion battery industry was single-handledly created by Sony in Japan back in the early 1990's; quickly followed by South Korea. China was very late to the game and so far behind, which is why China forced tech transfer from Japan and South Korea since 2011 (see example #1) and effectively banned them in 2015 (example #2) -- still refuses to enforce IPR of foreigners, which isn't anything new. Japan + Korea in fact started going after the Chinese infringers only this year and in Europe -- already scored significant legal victories and sales injunctions in Germany. Many more coming and CATL isn't far in their legal pipelines.

> 2. China specifically invited Tesla to enter the country, and showered it with subsidies.

Sure, again Tesla is the only foreign automaker operating fully independently without forced tech transfer and other jazz in China. Tesla is an exception, not the norm. After EU filed WT/DS549, China promised to reform FIL and supposedly implemented in 2020/2021, but Tesla still remains the only foreign automaker without forced JV/tech transfer today.

> 3. That's the opposite of how dumping works.

Wrong again. That's exactly how dumping works and why there are over 6-7 dozens of anti-dumping measures against China in EU. Dumping doesn't depend on a markup or profit/loss, but on the undistorted "normal-value" born by market without gov't interference -- eg, price fixing or illegal subsidies.

> This was a purely political decision.

Again there are over 100+ ACTIVE anti-subsidies/dumping measures in force against China. It's just one of many and has been on EU's radar for 15 years.

[DiogenesKynikos]

> Sure, I'm giving you a chronological high level view of China's illegal practices past 15 years

The Chinese automobile industry in 2011 is hardly relevant to the EV industry in China today. The EV industry was not built by technology transfer requirements.

> This was never allowed

It was not only allowed, but actually viewed as a legitimate way for underdeveloped economies to develop.

> Sure, Biden's IRA passed in 2022 is a counter measure against China's domestic sourcing since 2015.

The US has all sorts of "Buy American" provisions and subsidies, going way back before 2022.

> False. Most, or close to 80% of all ACTIVE lithium ion battery patents are held by Japan and South Korea.

You're talking about the 1990s. I'm talking about now, 30 years later. The Chinese lead in battery technology and spend massive amounts of money on R&D.

> Sure, again Tesla is the only foreign automaker operating fully independently without forced tech transfer

Not true. First off, just as a footnote, there never was "forced technology transfer." Foreign companies knew what the regulations in China were and made a rational business decision to trade some amount of IP for access to cheap labor. Both sides benefited. But beyond that, nowadays, any foreign car company can operate in China without a local joint venture partner. Tesla was the first, but it's not the only one, and other companies are free to leave their joint ventures if they want to. Most of the large foreign automobile manufacturers in China have either acquired majority stakes in their China operations or have bought out their JV partners completely. This is the norm now.

> Wrong again. That's exactly how dumping works

No, dumping involves selling your products below the cost of manufacture in foreign markets. When you instead sell them at a substantial markup, that's called "making bank."

[tooltalk]

> The Chinese automobile industry in 2011 is hardly relevant to the EV industry in China today. The EV industry was not built by technology transfer requirements.

of course they are relevant and are built on tech transfer.

> It was not only allowed, but actually viewed as a legitimate way for underdeveloped economies to develop.

Again, this was illegal then and China was taken to the WTO in 2018 (WT/DS549 China — Certain Measures on the Transfer of Technology ) as I'd already explained (example #1).

> The US has all sorts of "Buy American" provisions and subsidies, going way back before 2022.

Sure, which EV or batteries before 2022?

> You're talking about the 1990s. I'm talking about now, 30 years later. The Chinese lead in battery technology and spend massive amounts of money on R&D.

Again, "ACTIVE" patents. Patents last just 20 years. Korea in particular have already dominated most automotive lithium ion battery patents 10-15 years. Again, this why is China forced tech transfer and "effectively" banned Japan + Korea battery makers when they realized their local "champions" still couldn't catch up or compete in 2015. China's obsession with LFP whose core patents expired last 3-4 years is likewise no coincidence and their "RECENT" investment in "post"-lithium ion batteries, such as sodium.

> Not true. First off, just as a footnote, there never was "forced technology transfer."

Again, see the WTO case WT/DS549 China — Certain Measures on the Transfer of Technology

> No, dumping involves selling your products below the cost of manufacture in foreign markets. When you instead sell them at a substantial markup, that's called "making bank."

Again this doesn't apply to China. China's "local price" or "cost of manufacture" is not considered a "normal value" as their entire supply-chain is distorted by gov't subsidies.

Europe's Basic Regulation (EU) 2016/1036 (anti-subsidy regulation) has specific provisions for non-market-economy countries -- ie China, Article 2(7a)

  In the case of imports from non-market-economy countries (6), the normal value shall be determined on the basis of the price or constructed value in a market economy third country, or the price from such a third country to other countries, including the Union, or, where those are not possible, on any other reasonable basis, including the price actually paid or payable in the Union for the like product, duly adjusted if necessary to include a reasonable profit margin.

[chermi]

What do you mean by illegal? According to who? Like WTO or something? Genuinely asking, I don't know. I don't see how what they're doing is more illegal than paying corn farmers to make dumbass biofuel. But I don't know international trade law, hence the question.

[tooltalk]

the international legal standard for subsidies is based on the WTO's Subsidies and Countervailing Measures (SCM) Agreement and related anti-dumping regulation under GATT 1994.

In the US, it's implemented thru 19 U.S.C § 3571. The EU's foreign subsidies are regulated by Regulation (EU) 2016/1037 of the European Parliament and of the Council of 8 June 2016 based on the same WTO SCM Agreement.

While the WTO's regulations don't preclude local subsidy regulation, they must be consistent with the WTO's Agreement. In other word, any gov't subsidy favoring a "specific" company(ies) over domestic, foreign competitors, or distort market competition is an "actionable" offense and can be litigated before the WTO -- agriculture (quota based) and national security are however exempted. Others, such as export subsidies or local content requirement are prohibited under Article 3, "Prohibition" of the SCM.

[tooltalk]

Yeah, those evil corn subsidies. It's well to remember however that there is no international law against your gov't pissing away your tax payers hard-earned money -- so long as the product remains domestic and doesn't cause injuries to other trading partners.

That's your local political problem.