U.S. state and local governments have provided about $1.7 billion in subsidies to Chinese companies since 2010, a trend that must be reversed, said Robert Atkinson, president of Washington-based think tank Information Technology and Innovation Foundation.
“The official U.S. policy is to try to slow down China because they’re playing unfairly, if you will. So here we’re trying to slow down China, but at the same time, state and local governments are providing subsidies to speed up China,” Atkinson said in a recent interview with NTD.
China is known for engaging in a number of unfair trade practices, such as dumping cheap products in foreign markets, providing excessive government subsidies to Chinese companies helping them to gain market share, and stealing intellectual property (IP) and technologies. The Commission on the Theft of American Intellectual Property estimated in 2017 that the U.S. economy suffers an annual loss of between $225 billion to $600 billion from China’s IP theft each year.
The subsidy amount was tabulated by Washington-based watchdog Good Jobs First, a nonprofit that promotes corporate and government accountability. It found that China-based companies received over $1.8 billion in subsidies from U.S. government bodies from 1991 to 2020. The majority of the aid, about $1.7 billion, started flowing out of the United States in 2010.
The subsidies came in the form of tax credits, tax rebates, grants, loans, and property tax abatement. While most of the aid was handed out by state and local governments, some was distributed by federal agencies.
“Pretty much every state government and many local governments want to attract businesses to their borders,” Atkinson said. “They want to grow their economy, and by and large, they’re indifferent to whether those are American companies or British companies or Chinese companies.
“And so, they ended up actually subsidizing Chinese companies to come to the United States.”
According to the watchdog, two such companies are Chinese state-owned entities that have been identified by the Pentagon as having ties to the Chinese military—the Aviation Industry Corp. of China (AVIC) and China National Chemical Corp. (ChemChina). AVIC is also on the U.S. investment blacklist.
AVIC received a total of over $168 million in subsidies between 2009 and 2013, mostly in the form of tax credits and grants from the states of North Carolina and Michigan, according to the watchdog.
More recently, in 2020, the Iowa state government steered $717,355 in tax credits to Swiss-based agrichemical giant Syngenta, which is owned by ChemChina, according to the watchdog. The state government in North Carolina also gave Syngenta $155,594 in tax credit and rebates in 2019.
China’s Lenovo, a maker of personal computers that has received more than $135 million in subsidies as of 2019, has long been under the scrutiny of the U.S. government. In July 2019, the Pentagon’s Inspector General published a report (pdf) warning that Lenovo computers present an elevated risk for “cyberespionage” and “unauthorized system or network access.”
Atkinson said Congress could step in to prevent local U.S. governments from helping Chinese firms.
“Congress could pass a law that says, if you would like to continue to receive federal funds such as for highways, you can’t give money to a Chinese firm. It would stop tomorrow.”