Key stylized facts about industrial subsidies

There are five consistent patterns in the way governments offer support to companies across industrial sectors and years:
1. Subsidies and their types differ across countries and sectors – governments use a variety of instruments to support industrial firms with no one instrument taking overwhelming precedence, though some are more commonly used in certain sectors owing to industry specification; there are notable differences in the mix of instruments used in different jurisdictions; subsidies relating to firm value are larger for firms based in China than in other jurisdictions; there are important differences between firms whose production activities and sales are international with implications for subsidies they receive. (pp. 11-13, Figure 1, Table 3)
2. Subsidies are pervasive – less than 3% of all firms did not receive any subsidies in any year; no subsidies were reported for only 8% of firm-year observations; around half of firms received at least one type of government support every year during the period for which data are available; 90% of firms benefited from at least one subsidy for half of the period for which data are available; the receipt of government support is pervasive although the precise form of this support can vary over time; the ubiquity and persistence of subsidies may be due to their nature as parts of a tax code or to multi-year industrial policy strategies requiring sustained government support. (pp. 13-14, Figure 2)
3. Subsidies are relatively modest on average in most countries, but their distribution is highly skewed – the median annual subsidy across all firms and the whole sample is 0.7% of revenue; subsidies are larger relative to firms’ investment in fixed tangible assets with a median of nearly 9% - measuring subsidies in relation to investment is more relevant as they are often tied to investments in productive assets; even if small, subsidies can still have a significant economic impact on individual transactions and investment decisions; distribution of subsidies is highly skewed given instances of relatively large subsidies for a few firms; very high subsidies are concentrated mainly in China; distribution of subsidies is very skewed for each type of subsidy covered; subsidies increase less than proportionally with the size of companies, suggesting explicit or implicit upper limits on the amounts of subsidies that governments provide. (pp. 14-16, Figures 3-4)
4. Governments often rely on below-market finance to help distressed firms – below-market borrowings are common in capital-intensive heavy industries and in China, but also to support distressed firms during crises; in China, support through below-market borrowings is widely used even in normal times; governments have also given emergency non-market equity to help ailing companies both in times of distress and for strategic purposes such as industrial upgrading; while below-market finance peaks in times of crisis, it can also form part of a broader eco-system of government support in the context of a state-led manufacturing push; governments rely more on below-market financing during crises due to tighter financial conditions restricting firms’ access to financial markets and the ability to mobilize this financing quickly. (pp. 17-19, Figure 5)
5. State enterprises receive relatively more grants and below-market borrowings – state enterprises are generally larger recipients of support than their private competitors; government ownership of companies correlates positively with the amount of subsidies they receive relative to their size in terms of below-market borrowings and government grants, though the correlation is negative for income-tax concessions. (p. 19, Figure 6)
While generally stable, market shares of large manufacturing firms reveal a shift away from OECD member countries and toward China - China-based companies have seen more frequent gains than losses in market share, while the opposite is true for firms in other jurisdictions; gains in the market position of China-based firms at the cost of OECD-based firms are also visible at the regional level for most sectors but not all. (pp. 20-22; Figures 7-9)