Do Innovation Subsidies Make Chinese Firms More Innovative?

Chinese worker examines panel on machinery

The following item appears on, an "independent, non-partisan and non-profit platform initiated by a group of experienced and accomplished economists."

Motivated by the realization that China’s economic growth model that relied on three major factors—cheap labor, capital deepening supported by high savings (depressed consumption), and technology, most of which came from advanced foreign countries—is about to become obsolete, the Chinese government has been trying to encourage innovations by Chinese firms through various subsidy programs (König et al., 2018). Using data from the China Employer Employee Survey (CEES), we study the allocation and impacts of the innovation subsidies in China in a recent NBER working paper (Cheng et al., 2019). We examine what type of firms are more likely to receive the innovation subsidies and if the subsidized firms are more likely to be innovative (measured by the number of patents and the likelihood of introducing new products), productive, and profitable....

Read the full article on VoxChina.