This particular report matters because its conclusions are likely to shape policy debates well beyond the OECD itself. Yet the subsidy story is incomplete and increasingly inadequate. Like every major economy, China does use industrial policy, and its subsidies have mattered. But subsidies are no longer the most convincing explanation for Chinese firms’ growing competitiveness. The OECD is applying an old framework to an economy that has changed.

The report’s first weakness is methodological. The OECD’s estimates rely heavily on the concept of “below-market borrowing,” treating loans priced below China’s Loan Prime Rate (LPR) as subsidized finance. But the LPR is not a preferential policy rate. It is closer to an average commercial lending rate in China’s banking system.

The arithmetic is revealing. China’s five-year LPR is around 3.5 percent, while yields on 30-year government bonds are roughly 2.2 percent and ten-year bonds around 1.7 percent. A firm borrowing near the LPR is paying far more than the sovereign itself. Treating such lending as subsidized finance risks converting ordinary commercial borrowing into statistical evidence of government support.

The data tell a similarly awkward story. Evidence from more than 5,300 listed Chinese nonfinancial firms shows that the bulk of bank lending still flows to state-owned enterprises (SOEs) in traditional sectors such as infrastructure, utilities and construction. Many of China’s most competitive firms, by contrast, rely increasingly on retained earnings, equity financing and capital markets.

The timing is no less important. Between 2023 and 2025, subsidy intensity among listed new-economy firms declined substantially, and not by accident. While rising local-government debt sharply constrained local authorities’ capacity to provide support, the Chinese government’s push to build a unified national market sought to curb local protectionism and subsidy competition among regions. Thus, China’s emerging industries achieved their strongest gains during a period when subsidy intensity was declining, and when local governments’ budget constraints were hardening.

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The same interpretive problem appears in discussions of China’s current-account surplus. Its recent increase is often read as evidence that China has doubled down on export-led growth. But the simpler explanation lies in the domestic economy. After the property downturn, investment weakened more than national saving, and since the current-account balance is the difference between saving and investment, the surplus widened almost mechanically. Much of the adjustment reflects a property cycle, not a deliberate export strategy.

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