Table of Contents Ask the Chatbot

As of May 1, 2025, three countries had space programs with human space flight capabilities: China , Russia, and the United States. NASA’s ongoing Artemis program intends to return humans to the Moon, landing the first woman on the lunar surface. NASA has also launched the Europa Clipper , a robotic, solar-powered vehicle intended to orbit and explore Jupiter ’s moon Europa ; it is expected to reach the moon in 2030 after a 1.8 million-mile journey. Because the moon contains a large ocean almost entirely covered in ice and has a thin, oxygen-rich atmosphere, scientists believe Europa may be able to support life. [9] [36] [45]

According to a 2023 poll, 56 percent of Americans believed NASA would “get people onto Mars by its goal of 2040,” while 43 percent believed that within 50 years “at least some people will be living in space permanently — either on another planet such as Mars or on the moon.” The most common ideas for space colonization include settling on Earth’s Moon, building on Mars, and constructing new space stations . [20] [42]

The ISS continues to operate as a floating laboratory in Earth’s orbit. It has been continuously occupied by astronauts since November 2000. According to NASA, 280 individuals representing 23 countries and five International Partners had visited the space station, with astronauts spending an average of 182 days (about six months) aboard the ISS. Of those, 13 have been “space flight participants” (or private, non-astronaut guests). Russian cosmonaut Oleg Kononenko flew to the ISS five times and spent the longest time in space, breaking the record in February 2024; he amassed 1,111 days in space over numerous missions. [18] [19] [40] [41] [80]

What is it like to live in space? Astronauts at the International Space Station research, exercise, eat, and sleep—in outer space. (more)

What is it like to live in space? Astronauts at the International Space Station research, exercise, eat, and sleep—in outer space. (more)

Several private, commercial space flight companies were then founded, including Jeff Bezo’s Blue Origin (2000), Elon Musk’s SpaceX (2002), and Richard Branson’s Virgin Galactic (2004). While Blue Origin and Virgin Galactic have focused on sub-orbital flights with private citizens, SpaceX partnered with NASA, which allowed the American government to end its reliance on Russian space flights to travel to the ISS. [51] [55] [56] [58] [59] [60] [81]

Another key development was the rise of space tourism and companies to facilitate it. Space Adventures, a Virginia-based company founded in 1998 that does not launch space flights but matches private citizens with missions already scheduled to launch, organized the flight of American businessman Dennis Tito, who on April 28, 2001, became the first space tourist when he joined a Russian supply mission to the International Space Station (ISS). The trip cost $20 million. [50] [52] [53] [69] [70] [71]

Over the next six decades, NASA launched space stations , sent land rovers to Mars , flew past Pluto , orbited Jupiter , and engaged in numerous international missions, including joint efforts with its former nemesis, Russia. NASA’s space shuttle program began in 1981 using a reusable rocket-launched vehicle. It made 135 flights, delivering supplies to space stations, conducting experiments in space, and deploying and servicing satellites. The program ended in 2011. [7] [8] [10] [83]

In popular culture, space travel dates back to at least the mid-1600s when Cyrano de Bergerac first wrote of traveling to space in a rocket . Space fantasies flourished after Jules Verne ’s From Earth to the Moon was published in 1865 and after RKO Pictures released a film adaptation of the book, A Trip to the Moon, in 1902. Dreams of space settlement hit a zenith in the 1950s, spurred by the release of Ray Bradbury ’s si-fi classic The Martian Chronicles (1950) and Disneyland’s TV episode “Man and the Moon” (1955). [2] [3] [4]

Let us create vessels and sails adjusted to the heavenly ether, and there will be plenty of people unafraid of the empty wastes. In the meantime, we shall prepare, for the brave sky-travellers, maps of the celestial bodies. [1]

While humans have long imagined gods in the sky, the idea of space travel or humans living in space dates to at least 1610 after the invention of the telescope , when German astronomer Johannes Kepler wrote to Italian astronomer Galileo :

As space ecologist Joe Mascaro argues, “To save the Earth, we have to go to Mars.” Mascaro says that expanding technology to go to Mars will help solve problems on Earth: “The challenge of colonising Mars shares remarkable DNA with the challenges we face here on Earth. Living on Mars will require mastery of recycling matter and water, producing food from barren and arid soil, generating carbon-free nuclear and solar energy, building advanced batteries and materials, and extracting and storing carbon from atmospheric carbon dioxide—and doing it all at once. The dreamers, thinkers and explorers who decide to go to Mars will, by necessity, fuel unprecedented lateral innovations [that will help to solve problems on Earth].” [27]

Adds Gonzalo Munevar, interdisciplinary professor emeritus at Lawrence Technological University, “In the shorter term, a strong human presence throughout the solar system will be able to prevent catastrophes on Earth by, for example, deflecting asteroids on a collision course with us. This would also help preserve the rest of terrestrial life — presumably something the critics would approve of. But eventually, we should be able to construct space colonies… [structures in free space rather than on a planet or moon], which could house millions. These colonies would be positioned to construct massive solar power satellites to provide clean power to the Earth, as well as set up industries that on Earth create much environmental damage. Far from messing up environments that exist now, we would be creating them, with extraordinary attention to environmental sustainability.” [23]

Jeff Bezos suggested that we move all heavy industry off Earth and then zone Earth for residences and light industry only. Doing so could reverse some of the effects of climate change while colonizing space. [25]

“Furthermore, we have to realize that solving Earth’s environmental problems is extremely difficult and so will take a very long time. And we can do this while also pursuing colonization,” says Brian Patrick Green of Santa Clara University. [23]

While Earth is experiencing devastating climate change effects that should be addressed, Earth will be habitable for at least 150 million years, if not over a billion years, based on current predictive models. Humans have time to explore and colonize space at the same time as we mend the effects of climate change on Earth. [26]

Space, in particular, is connected to exploration and growth in the human imagination. In 2014 Elon Musk stated, “It’s obvious that space is deeply ingrained in the American psyche…. SpaceX is only 12 years old now. Between now and 2040, the company’s lifespan will have tripled. If we have linear improvement in technology, as opposed to logarithmic, then we should have a significant base on Mars, perhaps with thousands or tens of thousands of people.” [1]

Humans are not a species of stagnation. “The solar system can easily support a trillion humans. And if we had a trillion humans, we would have a thousand Einsteins and a thousand Mozarts and unlimited, for all practical purposes, resources and solar power unlimited for all practical purposes,” says Jeff Bezos, Founder of Amazon.com who traveled to space in 2021, courtesy of his company, Blue Origin. [25]

Fred Kennedy, president of the space transportation company Momentus, a space transportation company, argues that a fundamental truth—repeatedly borne out by history—is that expanding, outwardly-focused civilizations are far less likely to turn on themselves, and far more likely to expend their fecundity on growing habitations, conducting important research and creating wealth for their citizens. A civilization that turns away from discovery and growth stagnates.” Kennedy points out that while humans still have problems to resolve on Earth, “Forgoing opportunities to expand our presence into the cosmos to achieve better outcomes here at home hasn’t eliminated these scourges.” We shouldn’t avoid exploring space based on the false dichotomy of fixing Earthly problems first. [24]

Adds Sheri Wells-Jensen, associate professor of English at Bowling Green State University, “We have a moral obligation to improve: that is, to colonize yes, but to do it better: to actively unthink systems of oppression that we know exist. To spread ourselves without thought or care would probably result in failure: more planets spiraling toward global warming or space settlements filled with social unrest.” [23]

Some theorists, including Gonzalo Munevar at Lawrence Technological University, believe colonizing space will increase clean energy on Earth, provide access to the solar system’s resources, and increase knowledge of space and Earth. The benefits to humanity created by the resources and knowledge “create a moral obligation to colonize space.” [22]

According to some philosophies, humans are the only beings capable of morality, and, therefore, preserving humanity is the highest moral imperative. Following from that premise, Brian Patrick Green, Director of Technology Ethics at the Markkula Center for Applied Ethics at Santa Clara University, concludes, “Because space settlement gives humankind the opportunity to significantly raise the chances of survival for our species, it is therefore a moral imperative to settle space as quickly as possible.” [21]

Elon Musk, founder and CEO of SpaceX, believes “there is a strong humanitarian argument for making life multi-planetary, in order to safeguard the existence of humanity in the event that something catastrophic were to happen, in which case being poor or having a disease would be irrelevant, because humanity would be extinct. It would be like, ‘Good news, the problems of poverty and disease have been solved, but the bad news is there aren’t any humans left.’… I think we have a duty to maintain the light of consciousness, to make sure it continues into the future.” [1]

Humans haven’t even attempted to live in Antarctica or under Earth’s seas, which have many fewer challenges for human bodies, so why would humans want to live on a planet or on the Moon that’s likely to kill them fairly quickly? [28]

Humans would have a host of illnesses to deal with due to climate differences on Mars or the Moon: cancer, radiation illnesses, reproductive problems (or sterility), muscle degeneration, bone loss, skin burns, cardiovascular disease, depression, boredom, an inability to concentrate, high blood pressure, immune disorders, metabolic disorders, visual disorders, balance and sensorimotor problems, structural changes in the brain, nausea, dizziness, weakness, cognitive decline, and altered gene function, among others. Astronauts who have spent just a year in space have demonstrated irreversible health problems. [28] [29]

Meanwhile, lunar dust is made of shards of silica and cuts like glass. The dust that clung to the space suits of Apollo astronauts, scratching their visors and getting in their eyes and throats, could easily result in bronchitis or cancer. And the radiation on the Moon is about 200 times higher than on Earth, in addition to other problems, such as isolation and loneliness, that colonizing the Moon would cause. [35]

Adds bioethicist George Dvorsky, “The Red Planet is a cold, dead place, with an atmosphere about 100 times thinner than Earth’s. The paltry amount of air that does exist on Mars is primarily composed of noxious carbon dioxide, which does little to protect the surface from the Sun’s harmful rays. Air pressure on Mars is very low; at 600 Pascals, it’s only about 0.6 percent that of Earth. You might as well be exposed to the vacuum of space, resulting in a severe form of the bends—including ruptured lungs, dangerously swollen skin and body tissue, and ultimately death. The thin atmosphere also means that heat cannot be retained at the surface. The average temperature on Mars is -81 degrees Fahrenheit (-63 degrees Celsius), with temperatures dropping as low as -195 degrees F (-126 degrees C).” [28]

As novelist Andy Weir explains, “The problem is that you still don’t want to send humans to the moon. You want to send robots. Humans are soft and squishy and they die. Robots are hard and nobody gets upset when they die.” [34]

“Colonization has the odor of running away from the problems we’ve created here; if we do that, we will simply bring those problems with us. We need a major change in how we think about what it means to be human—we need to stop seeing our species as special and start seeing it as part of a collection of species,” argues John Traphagan, professor of religious studies at the University of Texas at Austin. “In my view, as long as we bring the … [idea] of human exceptionalism with us to other worlds, we are doomed to repeat the same mistakes we have made here.” [23]

Some assert that leaving Earth in shambles proves we are not ready to colonize space in terms of cultural, social, or moral infrastructure, regardless of technological advancements. Even the ongoing space race leaves its trash on Earth. For example, a more than 1,100-pound glowing ring, eight feet in diameter, of metal space junk crashed into a remote Kenyan village according to a January 2, 2025, New York Times article. While that is an especially dramatic example, space junk falls from the sky regularly and causes damage. [44]

As Lori Marino, founder and executive director of the Kimmela Center for Animal Advocacy, argues “we are not capable of enacting a successful colonization of another planet. The fact that we have destroyed our home planet is prima facie evidence of this assertion. It is sheer hubris to even consider the question of whether we should ‘go or not go’ as if we are deciding which movie to see this weekend because we really are not in a position to make that choice…. What objective person would hire humanity to colonize a virgin planet, given its abysmal past performance in caring for the Earth’s ecosystem (overpopulation, climate change, mass extinctions)?” [23]

If humans have the technology, knowledge, and ability to transform an uninhabitable planet, moon, or other place in space into an appealing home for humans, then surely we have the technology, knowledge, and ability to fix the problems we’ve created on Earth. [33]

Further, as noted by Linda Billings, research professor at George Washington University, “all life on Earth evolved to live in Earth conditions.… If humans can’t figure out how to adapt to, or arrest, changing conditions on Earth—then I can’t see how humans could figure out how to adapt to a totally alien environment.” [23]

But, a person has yet to set foot on Mars, and no space station has been built on another planet or natural satellite. [32]

Elon Musk explains that the SpaceX Mars colonization project would need one million people to pay $200,000 each just to move to and colonize Mars, which doesn’t include the costs incurred before humans left Earth. Returning to the Moon would have cost an estimated $104 billion in 2005 (about $170 billion in 2025 dollars), or almost 7 times NASA’s entire 2019 budget. [31] [32]

If a workable solution were found and implemented, a project of that magnitude would cost billions, perhaps trillions, of dollars.

A 2018 NASA study concluded that, based on the levels of CO₂ found on Mars, the above plan is not feasible. As explained by lead author Bruce Jakosky, professor of geological sciences at the University of Colorado at Boulder, “terraforming Mars is not possible using present-day technology.” [30]

In one widely promoted plan, Mars needs to first be warmed to closer to Earth’s average temperature—from roughly -76°F/60°C to 59 °F (15 °C), which will take approximately 100 years. Then the planet must be made to produce oxygen so humans and other mammals can breathe, which will take about 100,000 years or more. And those two steps can only be taken once Mars is thoroughly investigated for water, carbon dioxide (CO₂), and nitrates. [29]

Briony Horgan, assistant professor of planetary science at Purdue University, explains that “terraforming” Mars is “way beyond any kind of technology we’re going to have any time soon.” [28]

Timeline: Commercial Space Travel

This timeline is not meant to be exhaustive but to highlight major events in commercial spaceflight.

1998 – Eric C. Anderson Co-Founds Space Adventures The Russian space program created medical and training guidelines for Space Adventures to follow in order to buy seats on Soyuz flights and send tourists to space. Between 2001 and 2011, the company would send eight people into space. The company has an advisory board of eight astronauts including Buzz Aldrin.[52][53]

1999 – Richard Branson Registers “Virgin Galactic” Name Richard Branson Branson is the founder of the Virgin Group, which includes Virgin Galactic. (more) Branson, the founder of Virgin Records, has participated in record-breaking adventures “including the fastest ever Atlantic Ocean crossing, a series of hot air balloon adventures and kitesurfing across the English Channel.” He also founded travel companies Virgin Atlantic, Virgin Australia, Virgin America, Virgin Holidays, Virgin Limited Edition, Virgin Trains, and Virgin Hotels. [57]

2000 – Spaceflight Company Blue Origin Founded Founded by Amazon magnate Jeff Bezos, the company didn’t gain much public interest until Bezos bought land for Blue Origin in Texas in 2006. [56]

April 28, 2001 – Dennis Tito Becomes First Space Tourist Dennis Tito Dennis Tito, 2003. (more) Via space tourism company Space Adventures, Dennis Tito, a then-60-year-old American billionaire and former NASA Jet Propulsion Laboratory (JPL) engineer, spent $20 million to travel to the ISS on a Russian Soyuz rocket. Looking back on the experience 20 years later, he told CNN: “I was euphoric. I mean, it was the greatest moment of my life, to achieve a life objective, and I knew then that nothing could ever beat this.” [50]

March 14, 2002 – SpaceX Founded SpaceX, founded by Elon Musk, helped usher in the era of commercial spaceflight. According to the company, their goal is: to expand access to outer space. Not just for government or traditional satellite operators, but for new participants around the globe. Today [September 10, 2024], we’re flying at an unprecedented pace as the world’s most active launch services provider. SpaceX is safely and reliably launching astronauts, satellites, and other payloads on missions benefiting life on Earth and preparing humanity for our ultimate goal: to explore other planets in our solar system and beyond. [55]

April 25, 2002 – Mark Shuttleworth Is First South African in Space Shuttleworth, Mark Mark Shuttleworth aboard the International Space Station, April 27, 2002. (more) Mark Shuttleworth bought a seat on a Russian spacecraft for $20 million in 2001. He then trained in Star City, Russia, and in Kazakhstan for a mission aboard a Soyuz capsule to the International Space Station (ISS). On April 25, 2002, Shuttleworth lifted off on Soyuz TM-34 from the Baikonur Cosmodrome in Kazakhstan. On the flight with him were two cosmonauts, commander Yury Gidzenko of Russia and flight engineer Roberto Vittori of Italy. They docked two days later at the ISS. Shuttleworth spent eight days aboard the space station, where he conducted scientific experiments for South Africa. He returned to Earth aboard Soyuz TM-33 on May 5, 2002. [54]

2004-2005 – Virgin Galactic Founded and Begins Advertising Space Flights Commercial flights with Virgin Galactic were priced at $200,000 per seat and up. The price climbed to $450,000 per seat and had a 700-person waiting list by May 2023. The company wouldn’t launch a commercial space flight until June 29, 2023. [58][59][60]

October 1, 2005 – Gregory Olsen Is the Third Space Tourist Olsen, Gregory Gregory Olsen, 2005. (more) American scientist and entrepreneur Gregory Olsen was the third space tourist to take advantage of Space Adventure’s partnership with the Russian space program. Reportedly paying $20 million for the opportunity, he trained for five months at the Yury Gagarin Cosmonaut Training Center in Star City, Russia. Alongside commander Valery Tokarev of Russia and flight engineer William McArthur of the United States, Olsen flew in Soyuz TMA-7 that launched on October 1, 2005. The Soyuz docked with the International Space Station (ISS) on October 3, 2005, where Olsen assisted the crew in conducting various life science experiments on the ISS, including an examination of the effect of microgravity on cell surfaces and intercellular interactions and an investigation of the effects of radiation exposure on human organs. Olsen also carried out several self-designed experiments in remote sensing and astronomy and tested equipment for his firm, Sensors Unlimited, while in space. He returned to Earth aboard Soyuz TMA-6 on October 11. [61]

September 15, 2021 – First Orbital Mission With No Professional Astronauts Aboard 37-year-old tech entrepreneur and airplane pilot Jared Isaacman commanded the autonomous Inspiration4 mission, the first mission to orbit Earth with no professional astronauts. The Crew Dragon SpaceX spacecraft orbited Earth three times, during which time Isaacman placed the first known sports bets from space. He bet $4,000 that the New York Giants and the Washington Football Team would score at least 40.5 combined points during a game and another $4,000 on the Philadelphia Eagles to win the Super Bowl. The stunt resulted in $50,000 in donations to St. Jude Children’s Research Hospital. One seat was gifted to Hayley Arceneaux, a St. Jude’s physician’s assistant and cancer survivor. The second seat went to Chris Sembroski, whose friend won a raffle raising money for St. Jude’s. And the third seat went to Sian Proctor, who won a contest in which entrepreneurs raised money for St. Jude’s. The trip raised over $250 million for St. Jude’s Children’s Research Hospital from the raffle, contest, and other donations. [73][74][75][76]

September 18, 2006 – Anousheh Ansari Becomes the First Female Space Tourist, as well as the First Muslim Woman and First Person of Iranian Descent to Go to Space Anousheh Ansari Anousheh Ansari, 2006. (more) American businesswoman Anousheh Ansari emigrated to the United States from Iran as a teenager. She reportedly paid Space Adventures $20 million to fly to space aboard a Russian Soyuz. Originally a backup for Enomoto Daisuke, a Japanese businessman, Ansari was able to fly when Enomoto was disqualified for medical reasons. Flying with commander Mikhail Tyurin of Russia and flight engineer Michael Lopez-Alegria of the United States, the Soyuz TMA-9 launched on September 18, 2006. They docked at the ISS on September 20, 2006, where she spent eight days completing human physiology experiments for the European Space Agency, conducting interviews with Iranian national TV, and becoming the first person to blog from space. She returned to Earth on Soyuz TMA-8 on September 29, 2006. [62]

April 7, 2007 – Charles Simonyi Becomes Fifth Space Tourist Charles Simonyi, a Hungarian-born American software executive, paid $20 million to Space Adventures to be the fifth space tourist. He trained for six months at the Yury Gagarin Cosmonaut Training Center in Star City, Russia. On April 7, 2007, along with Russian cosmonauts, Expedition 15 commander Fyodor Yurchikhin, and flight engineer Oleg Kotov, Simonyi was launched into space on Soyuz TMA-10 from the Baikonur Cosmodrome in Kazakhstan. After 11 days on the International Space Station where he performed scientific experiments and talked to high school students via amateur radio, he returned to Earth aboard the Soyuz TMA-9 on April 21, 2007. [63]

September 24, 2008 – Enomoto Daisuke Sues Space Adventures for Canceled Trip Japanese businessman Enomoto Daisuke was scheduled to join the September 18, 2006, Space Adventures flight to the ISS and was supposed to be the first space tourist to complete a space walk. Enomoto alleges that Space Adventures took his payment for the flight and walk without having permission from the Russians or the ISS for the walk and then grounded him without cause. According to Space Adventures, Enomoto was grounded for a chronic kidney stone condition and was not entitled to a refund of his $21 million. Enomoto said he has never seen the medical documentation. The lawsuit was dismissed in 2009. [66][67]

October 12, 2008 – Richard Garriott, Son of NASA Astronaut, Becomes Space Tourist Soyuz The Soyuz TMA-13 spacecraft in flight after takeoff. A Soyuz mission to the International Space Station (ISS) launched from Baikonur, Province of Kazakhstan, October 12, 2008. spaceship, rocket blast off, space travel (more) Richard Garriott, a British-born American computer-game developer, is the son of NASA astronaut Owen Garriott, who first flew into space with the Skylab 3 mission on July 28, 1973. The younger Garriott, an investor in Space Adventures who reportedly paid $35 million for the trip. He trained at the Yury Gagarin Cosmonaut Training Centre in Star City, Russia, after which he went to space aboard Soyuz TMA-13 on October 12, 2008, with commander Yury Lonchakov of Russia and flight engineer Edward Fincke of the United States. He completed work on the ISS and spoke with students from space, took photos for the Nature Conservancy, and conducted scientific experiments. He returned to Earth via Soyuz TM-12 on October 23, 2008. [64][71]

September 30, 2009 – Cirque du Soleil Co-Founder Guy Laliberté Becomes First Canadian Space Tourist Rocket launch from Russia’s Baikonur site The Soyuz TMA-16 launches from Baikonur Cosmodrome in Kazakhstan on September 30, 2009, carrying Expedition 21 Flight Engineer Jeffrey N. Williams, Flight Engineer Maxim Suraev and Spaceflight Participant Guy Lalibertly to the International Space Station. (more) Laliberté, a French Canadian performer and entrepreneur, traveled to the ISS via the Russian Soyuz TMA-16. Of the launch, he wrote The launch is spectacular to look at; it’s very noisy, very powerful. But inside it’s not as noisy; you’re in your little seat tied in, and it only takes eight and a half minutes to go from Earth to space. When you hit space it’s an amazing, joyful moment. You see Earth like you’ve never seen it in your life. [65][68]

2009-2020 – Russia Halts Space Tourism The Russian Space Agency, Roscosmos, announced in January 2009 that it would no longer take commercial clients into space. The International Space Station crew was scheduled to increase to six astronauts so that Canadian, European, and Japanese astronauts could live aboard the station. Plus, NASA stopped its space shuttle program in 2011 due to cost (one flight cost an average of $450 million), long turnaround times for shuttles to return to Earth, and safety issues. Because NASA was no longer launching shuttles, American astronauts turned to the Russian space program to ride along in the Soyuz rockets. With Canadians, Europeans, Japanese, and Americans now relying on Russian shuttle flights, there were no seats available for commercial clients. [69][70][71]

May 25, 2012 – SpaceX Dragon Capsule First Commercial Spacecraft to Dock at International Space Station SpaceX Dragon Dragon capsule by SpaceX docking with the International Space Station on May 25, 2012—the first time a commercial spacecraft did so. (more) When NASA astronaut Donald R. Pettit successfully secured the capsule, he said: “It looks like we’ve got us a Dragon by the tail.” [81]

May 2020 – SpaceX Becomes First Commercial Spaceship to Take NASA Astronauts to Space The United States last launched American astronauts into space in 2011 when the Space Shuttle program ended. NASA’s astronauts then traveled to space on Russian Soyuz flights, which cost NASA as much as $86 million per seat over the years. This changed in 2020, when SpaceX took NASA astronauts Robert Behnken and Douglas Hurley to the ISS, marking the first time a commercial aerospace company had taken humans into orbit. (Space Adventures has facilitated space travel for private, paying citizens by matching them with Russian space missions, whereas SpaceX is an aeronautics company launching astronauts into space.) [51]

January 28, 2021 – Russian Glavkosmos Sells Commercial Seats on Soyuz Flights Glavkosmos is the commercial arm of the Russian space agency Roscosmos. “We assume that each crewed Soyuz MS spacecraft intended solely for commercial spaceflight will have two seats for space tourists,” with a professional astronaut occupying the third seat, said Glavkosmos spokesman Evgenii Kolomeets. [49]

July 11, 2021 – First Virgin Galactic Flight Launches Richard Branson launched himself, two pilots, and three mission specialists into space from New Mexico for a 90-minute sub-orbital flight on the Virgin Galactic Unity 22 mission. [14][15]

July 20, 2021 – First Blue Origin Sub-Orbital Space Flight Jeff Bezos Jeff Bezos, 2017. (more) Jeff Bezos followed on July 20, 2021, accompanied by his brother, Mark, and both the oldest and youngest people to go to space: 82-year-old Wally Funk, a female pilot who tested with NASA in the 1960s but never flew, and Oliver Daemen, an 18-year-old student from the Netherlands. The fully automated, unpiloted Blue Origin New Shepard rocket launched on the 52nd anniversary of the Apollo 11 Moon landing and was named after Alan Shepard, who was the first American to travel into space on May 5, 1961. [16][17]

October 5, 2021 – Actress Yulia Peresild and Director Klim Shipenko Film Movie Aboard ISS The Russian pair filmed The Challenge about a surgeon (played by Peresild) who has to make an emergency “house call” to the space station. Returning cosmonaut Oleg Novitskiy played the patient, filming additional scenes upon their return to Earth on October 17. [82]

December 8, 2021 – Yusaku Maezawa and Yozo Hirano Become First Japanese Space Tourists The pair flew aboard a Russian Soyuz MS-20 to the International Space Station, spending a total of 12 days on the trip. [79]

April 8, 2022 – First SpaceX Flight with Paying Customers On April 8, 2022, Axiom Mission 1 (Ax-1) crew and the SpaceX Dragon spacecraft launched, carrying three paying customers and a former NASA astronaut on a round trip to the International Space Station (ISS). Mission AX-1 docked at the ISS on April 9 with former NASA astronaut, then-Axiom Space employee, and mission commander, Michael Lopez-Alegría, Israeli businessman Eytan Stibbe, Canadian investor Mark Pathy, and American real estate magnate Larry Connor. The group returned to Earth on April 25, 2022, after spending 15 days at the ISS. While this was not the first time paying customers or non-astronauts had traveled to the ISS (Russia had sold seats on their missions), this was the first American mission and the first with no active-duty government astronaut corps members. [38][39]

April 25, 2022 – Larry Connor First to Go to Space and the Depths of the Ocean in a Year Connor, a real estate magnate, returned to Earth on April 25, 2022. In April 2021, he dove to the deepest ocean depths of the Mariana Trench: the Challenger Deep, Sirena Deep and a seamount in the Mariana Trench. [77]

January 2022 – ISS Film Production Studio and Sports Arena Announced Space Entertainment Enterprise (SEE) announced plans for a film production studio and a sports arena in space. The module, named SEE-1, docked on Axiom Station, which is the commercial wing of the International Space Station. SEE planned to host film and sports events, as well as content creation. [37]

June 29, 2023 – Virgin Galactic Launches First Commercial Flight Fully into Space Galactic 01 (formerly VSS Unity) launched from Spaceport America in New Mexico with two pilots, a Virgin Galactic trainer, and three paying passengers who are members of the Italian Air Force (Col. Walter Villadei and Lt. Col. Angelo Landolfi) and the National Research Council of Italy (Pantaleone Carlucci). Also on board were 13 scientific research payloads flown on behalf of the Italian Air Force, Italy’s National Research Council, the University of Padova, and the University of Rome Tor Vergata. As of this flight, Virgin Galactic had a backlog of 800 paid passengers. The flight is the first time a private, commercial company launched a space flight that traveled into space (rather than a sub-orbital flight). [59][60]

September 12, 2024 – Jared Isaacman Takes First Commerical Spacewalk Jared Isaacman, a tech entrepreneur, was the first commercial passenger to take a spacewalk. Isaacman, who was testing a new spacewalking suit, kept a hand or foot attached to the SpaceX capsule at all times and was outside of the capsule for about 10 minutes. Two other crew members, Scott “Kidd” Poteet, a former Air Force Thunderbird pilot, and SpaceX engineer Anna Menon, stayed strapped into their seats the entire time. [72]

September 12, 2024 – Sarah Gillis Takes Second Commercial Spacewalk SpaceX engineer Sarah Gillis followed Jared Isaacman as the second person to take a commercial spacewalk. She performed some stretches to test a new spacesuit and was quickly back inside the SpaceX capsule. Two other crew members, Scott “Kidd” Poteet, a former Air Force Thunderbird pilot, and SpaceX engineer Anna Menon, stayed strapped into their seats the entire time. [72]

January 18, 2024 – First All-European Commercial Flight to ISS All four astronauts aboard Axiom Mission 3—Michael López-Alegría (Spain), Walter Villadei (Italy), Alper Gezeravcı (Turkey), and Marcus Wandt (Sweden)—were born in Europe. The crew spent 18 days in space, mostly at the International Space Station, returning on February 9. [78]

Table of Contents Ask the Chatbot

For more detail on the history of energy use, and for the latest news on U.S. policy concerning alternative energies, see ProCon’s historical timeline .

As reported by the U.S. Energy Information Agency (EIA), at the start of 2024 the United States’ energy consumption remained primarily fossil fuels (83%, comprised of 9% coal, 36% natural gas, and 38% petroleum). Nuclear energy comprised 9% of total consumption, with renewable sources also comprising 9% (of these renewable sources, 1% was geothermal, 11% solar, 10% hydroelectric, 18% wind, and 60% biomass ). Note: Sum of percentages will not always equal exactly 100% because of the rounding of numbers. [7]

Globally, fossil fuels have been used for energy for much of human history. The Chinese were the first to transition to fossil fuels from wood fire energy. They used coal as early as 2000 bce, natural gas since 200 bce, and petroleum since the 1st century ce. Europeans developed hydropower in 200 bce, and Persians developed windmills in the 10th century ce. The famed Dutch windmills wouldn’t be built until the 1590s. Other energies, both fossil and alternative, are relatively new for energy uses, appearing in the 19th and 20th centuries. [1] [2] [3] [4] [5] [6]

Nuclear power is clearly an effective way of lowering carbon emissions and slowing global warming. At this point in the climate crisis, we ignore nuclear power at our peril.

Moreover, “nuclear plants require far less land than renewables. Even in sunny California, a solar farm requires 450 times more land to produce the same amount of energy as a nuclear plant.…Nuclear requires far less in the way of materials, and produces far less in the way of waste compared to…solar and wind,” explains Michael Shellenberger, cofounder of Breakthrough Institute and founder of Environmental Progress. [29]

To illustrate the need for nuclear power use, Germany and France are often compared. Germany, which relies on fossil fuels for 35% and renewables for 40% of energy consumption, emitted about 675 million tonnes of CO2 in 2021. France, which relies on nuclear power for 70% of energy consumption, emitted 305 million tonnes of CO2. While both carbon emissions rates are significantly lower than the American emissions of 5 billion tonnes, that France has 88% of Germany’s population but half the emissions rates shows the need for nuclear power to lower CO2 emissions. [29] [30] [31] [32]

“Advanced [nuclear] reactors can dependably generate zero-emission electricity and useful heat, and they are scalable to produce large quantities of energy from a very small footprint. New designs hold the promise of being more affordable, even safer, and are expected to produce less waste than the current generation of reactors,” explains Bob Perciasepe, president of the Center for Climate and Energy Solutions. “To meet our climate and clean energy goals, we must seek stable solutions that endure political transitions and maintain an ambitious pace to reduce emissions.” [28]

Further, the industry is still innovating, making renewable energy adoption even easier. In addition to the traditional renewable energies that account for 68% of Sweden’s energy production, the country also uses “body heat”: “So-called passive houses are built without conventional heating systems and are kept warm by the heat given off by their occupants and electrical appliances. Sweden’s first passive house was completed in 2001. Since then, more buildings have followed. In Stockholm, the body heat from commuters passing through the central station is used to heat a nearby building, and in the southern town of Växjö, there are passive high-rises.” [27]

And Iceland is not an outlier. Renewable energies account for significant portions of many countries’ energy production: Paraguay (99.9%), Costa Rica (99.78%), Norway (98%), Uruguay (98%), Democratic Republic of the Congo (96%+), Albania (96%), Nicaragua (81%), Kenya (80%), New Zealand (80%), Denmark (67%), Germany (46%), the United Kingdom (40%), and Morocco (37%). [7] [12] [13] [14] [15] [16] [17] [18] [19] [20] [21] [22] [23] [24] [25] [26]

Iceland was the first country to propose a shift to 100% renewable energy use in 1998. The country’s energy is now 85% domestically produced geothermal energy and hydropower. Fossil fuels, mainly oil used in transportation, accounted for just 15% of the country’s energy. [11]

Renewable energy is “usable energy derived from replenishable sources such as the Sun (solar energy), wind (wind power), rivers (hydroelectric power), hot springs (geothermal energy), tides (tidal power), and biomass (biofuels),” according to Encyclopӕdia Britannica. Fossil fuels (oil and coal, for example) and nuclear power (which relies on a nonrenewable resource, uranium) are not renewable. [10]

The United Nations states simply, “Energy is at the heart of the climate challenge – and key to the solution….We need to end our reliance on fossil fuels and invest in alternative sources of energy that are clean, accessible, affordable, sustainable, and reliable.” [9]

However, the solutions do not “depend on something that still needs to be invented. We actually have all the knowledge we need. All the tools we need. We just need to implement it,” says Friederike Otto, a climate scientist at Imperial College London. [8]

Journalist Sarah Kaplan summarizes, “Climate disasters will become so extreme that people will not be able to adapt. Basic components of the Earth system will be fundamentally, irrevocably altered. Heat waves, famines and infectious diseases could claim millions of additional lives by [the 21st] century’s end.” If we do nothing, “a child born today would live to see several feet of sea level rise, the extinction of hundreds of species and the migration of millions of people from places where they can no longer survive.” [8]

While it may sound dramatic, the choice is between using alternative energies and your great-great-grandchildren inheriting an uninhabitable planet thanks to the continued use of fossil fuels.

“Undoubtedly yes, the world must accelerate its transition to renewable energy.…Cost is no longer a major barrier for renewables; intermittency is. So we need to develop technologies to store energy for periods of little or no wind or sunshine. Batteries are one answer, but they face scale, resource availability and environmental challenges. An alternative is to use spare capacity at times of high renewable availability to split water into oxygen and hydrogen. The hydrogen can then generate electricity or drive heavy transport, aircraft or processes not easy to electrify.”

Renewables, particularly small-scale renewables, are cheaper and faster to install. Small-scale renewables also tend to generate and keep power locally. This becomes a more effective way to fight energy poverty. Renewables are cheaper than nuclear, can compete with gas, and their price continues to fall. Rapidly phasing out fossil fuels and transitioning to renewables is the only choice for the climate and the economy.”

Over a billion people around the world lack access to electricity, and increasing fossil fuel-based generation will not fix this. Coal and nuclear power plants are expensive boondoggles. Communities living in energy poverty are continuously left in the dark without access to the grid as corporations sell power to industrial users and for export to recoup the costs.

“Transitioning to renewable energy is not only necessary to fight the climate crisis, it is also the only way we can quickly and effectively meet rising energy demands. It is foolish to think, however, that the fossil fuel industry will eagerly embrace this transition. We must push governments to enact an ambitious climate strategy that phases out all fossil fuels and transitions to a sustainable economy.

“Global dependence on oil, natural gas and coal–and the damage this dependence inflicts–is well documented. But a transition away from fossil fuels is in progress and simply needs to be expedited. Alternative energy sources can effectively replace fossil fuels in key areas that keep industries and countries running, from power to public and private transport to thermal comfort.”

Con 1: Natural gas, a fossil fuel, is an appropriate and necessary bridge fuel to meet net-zero emissions goals. The assertion that we must transition to alternative energies now or face the imminent demise of the planet has kneecapped the implementation of a realistic and immediate improvement to the environment. Yes, greenhouse gas emissions must be lowered if Earth is to remain habitable, but we are already equipped to use natural gas, which is cleaner than coal, moving us toward a net-zero carbon dioxide (CO2) emissions goal. Without gas, we are left without an existing infrastructure, and we will fail to meet our clean-energy goals. [33] “The clearest case for switching from coal to gas comes when there is the possibility to use existing infrastructure to provide the same energy services but with lower emissions,” says the International Energy Agency. “Given the time it takes to build up new renewables and to implement energy efficiency improvements, this also represents a potential quick win for emissions reductions. There is potential in today’s power sector to reduce up to 1.2 gigatonnes of CO2 emissions by switching from coal to existing gas-fired plants….The vast majority of this potential lies in the United States and in Europe. Doing so would bring down global power sector emissions by 10% and total energy-related CO2 emissions by 4%.” [34] The U.S. Environmental Protection Agency (EPA) reported a 1% drop in CO2 emissions in 2022 as a result of the ongoing switch from coal to natural gas. [35]

Con 2: The idea that renewable energies will fill the energy needs of large countries anytime soon is ridiculous and hinders realistic change for the better. “Humanity’s history is full of energy transitions that moved from one dominant source of energy, such as whale oil or timber, to a more efficient source over time,” states Cornelis van Kooten, professor of economics at the University of Victoria. “The difference now is that governments want to force the transition on an expedited timeline while optimistically assuming a technological breakthrough in the future.” Realistic policies and interim steps are critical to affecting positive climate change. [36] American renewable energy use has hovered between a low of 5.37% (in 2001) and a high of 11.44% (in 2019) since 1949. And nuclear energy, not used until 1959, topped out at 8.89% in 2002. In all, alternative energy use in the United States (the total use of both renewable sources and nuclear energy) has never topped 20% (the highest is 19.98% in 2017) of total energy use. [37] Further, international agreements have failed to put a dent in America’s fossil-fuel use. In the eight years since the U.S. signed the Paris Agreement in 2015 to reduce greenhouse gas emissions to net zero by 2050, American fossil-fuel use has only minimally fluctuated between a high of 81.22% (in 2015) and a low of 73.08% (in 2020). [37] With only some 25 years until the 2050 net-zero emissions deadline, no statistical increase in the use of alternative energies, and no clear policy changes, how can we expect alternative energies to replace fossil fuels? What’s needed instead are reasonable interim steps, not pie-in-the-sky policymaking. Responsible programs, perhaps in conjunction with the use of cleaner bridge energies such as natural gas, can better assist larger countries down the road to cleaner energy use. With doomsdaylike predictions looming about climate change, “it’s essential to focus on the realistic, broad-based approaches that are already advancing environmental progress,” says Sam Winstel, writer for the American Petroleum Institute. [38]

Introduction

Over most of the post-1978 period, and especially as it prepared to join the WTO, China made admirable progress toward marketization. It reduced trade and investment barriers, improved intellectual property rights regimes, removed price controls, and improved laws governing customs, product quality, and commodity inspections. It also boldly reformed its tax, corporate, and price systems. At the turn of the century, it shook up its state-owned firms at the cost of millions of jobs. Altogether, its regulators revised over 10,000 rules to align with international standards.

However reforms have stalled in recent years. Despite ambitious promises of market-centered reforms in 2013, China has not delivered on enough to assuage trade partner concerns. Market outcomes in China and their impacts abroad are still distorted by many state-related factors. Beijing has made perfectly clear that it asserts control over the economy, including its lifeblood, the financial system.

China is now starting to feel the limits of its decade-long, investment-led, and industrial policy-fueled growth model. Rising imbalances in its economy—including persistent overcapacity, a growing manufacturing trade surplus, and deflationary pressures—are not only creating domestic vulnerabilities but also distorting global trade and challenging industrial ecosystems abroad.

This has created tensions with other trading nations, with some US policymakers even calling for the withdrawal of China’s permanent normal trade relations status. At the same time, the global trade environment itself has shifted significantly. Many countries—including the US and the EU—have ramped up support for their domestic industries, embracing industrial policy and local industry protection on a scale that the GATT and later the WTO were meant to prevent. The US, once the leading proponent of a rules-based global trade system, has turned away from WTO rules, opting for unilateral trade actions and bypassing multilateral dispute settlement.

This leaves policymakers worldwide grappling with the dual challenge of protecting their economies from China’s market distortions while navigating escalating trade tensions—and, for many, trying to preserve the integrity of the rules-based trading order amid these pressures. In the longer term, if and when the global trade system eventually stabilizes, the question of how to reset or update the rules to make them more sustainable and fit for purpose will become unavoidable.

At the heart of this debate will be China. Beijing does not explicitly challenge the WTO and, in fact, officially positions itself as a defender of the multilateral trade system. However, its market distortions are more systemic, more widespread, and—because it accounts for a third of global manufacturing—more consequential than those of any other major economy. The scale of China’s state support is simply not the same.

A fact-based assessment of China’s policies and practices is therefore critical to inform current debates. This paper provides as comprehensive an accounting as possible of China’s state support by cataloging subsidies and subsidy-like measures. It documents the scope and scale of Chinese state support that qualifies as countervailable subsidies. It also highlights the difficulties in using them in CVD investigations due to partial data, opaque practices, and the multiplicity of actors involved.

Beyond traditional tools, this paper also focuses on non-conventional forms of state support beyond the scope of the WTO rules. These forms of state support distort the Chinese and global playing fields in a similar way to subsidies, generally to the near-term benefit of China-made products, contributing to China’s expanding dominance in global manufacturing.

To better discipline these distortions, some economies have already started to push the boundaries of existing rules. For example, the EU’s CVD investigation into imports of China-made battery electric vehicles has used existing trade tools in a more creative and expansive way. A growing number of cases brought under the WTO, as well as new trade instruments like the EU’s Foreign Subsidies Regulation, suggest a trend toward more aggressive enforcement within existing legal frameworks. But despite these adjustments, there are serious concerns about the ability of current legal instruments to effectively counter the scale and complexity of China’s state-driven economic model.

Ultimately, however, the long-term relevance of the rules-based global trading system depends on its ability to address the full spectrum of trade and market distortions that undermine fair competition. Failing to do so risks a fragmentation of the global economic order, with the proliferation of mini-lateral frameworks, sectoral trade agreements, and an erosion of multilateral norms. Over time, this could weaken the guardrails that prevent national security or environmental justifications from overtaking normal trading relations, further accelerating the shift toward a more fragmented, unpredictable, and politicized trade environment.

Actionable subsidies under the WTO system

Today’s rules-based international trading system, with the WTO at its heart, are founded on the principle that international trade should be conducted fairly, with minimal distortions caused by government intervention or support. In particular, the Agreement on Subsidies and Countervailing Measures (SCM Agreement), signed in 1994 by 128 countries including China, provides a framework to address specific types of subsidies that are actionable or prohibited—and enables members to take action when these subsidies cause material injury to domestic industries.

The SCM Agreement was deliberately designed to focus on specific types of distortions, particularly those involving financial contributions by a government or a government-entrusted body. It only applies to subsidies related to trade in goods, leaving aside trade in services, and foreign direct investment. Other subsidy-like distortive measures can be challenged under other WTO rules, such as the Trade-Related Investment Measures (TRIMs) Agreement, but these rules typically require members to initiate disputes through the WTO’s dispute settlement mechanism. This process can be time-consuming, uncertain, and costly – and has been effectively stalled due to the vacancy of the WTO Appellate Body since December 2019, which blocks major avenues for legal recourse.

The WTO SCM Agreement’s definition of subsidies contains three basic elements: (1) a financial contribution (2) by a government or any public body within the territory of a Member (3) which confers a benefit. All of these elements must be satisfied in order for a subsidy to exist.

Financial contribution means: a direct transfer of funds (e.g., a grant, loan, or infusion of equity); a potential transfer of funds or liabilities (e.g., a loan guarantee); foregone government revenue (e.g., a tax credit); or the purchase of goods, or the provision of goods or services (other than general infrastructure).

means: a direct transfer of funds (e.g., a grant, loan, or infusion of equity); a potential transfer of funds or liabilities (e.g., a loan guarantee); foregone government revenue (e.g., a tax credit); or the purchase of goods, or the provision of goods or services (other than general infrastructure). To determine that an entity is a public body , the entity should “possess, exercise, or be vested with governmental authority.” The Appellate Body, however, stipulated that measures may still be attributed to a government if the entity is a private entity “entrusted or directed” by a government or by a public body.

, the entity should “possess, exercise, or be vested with governmental authority.” The Appellate Body, however, stipulated that measures may still be attributed to a government if the entity is a private entity “entrusted or directed” by a government or by a public body. Benefit : government provision of equity capital, loans, goods and services, shall not be considered as conferring a benefit, unless the decision can be regarded as inconsistent with the usual investment practice.

Further, only some subsidies are countervailable under the SCM Agreement. Some subsidies are prohibited under the rules, including export performance subsidies and local content requirement subsidies. But beyond those, a member state can only take countervailable actions against a subsidy if it is specific , meaning it needs to have been specifically provided to an enterprise or industry or group of enterprises or industries. The underlying principle is that a subsidy that distorts the allocation of resources within an economy should be subject to discipline. Where a subsidy is widely available within an economy, such a distortion in the allocation of resources is presumed not to occur.

The member state must also show adverse effects of the subsidy. These include (1) injury to the domestic industry of another Member, (2) nullification or impairment of benefits accruing directly or indirectly to other Members under GATT 1994, or (3) serious prejudice. This last category includes total ad valorem subsidization of a product over 5%, subsidies covering operating losses sustained by an industry or an enterprise, or if the effect of the subsidy creates a significant price undercutting.

A taxonomy of China’s state support mechanisms

The Chinese government uses a wide range of instruments to intervene in the economy and steer industrial outcomes (Table 1). Many of them are conventional subsidies that are widely used in other countries and largely fall under the SCM Agreement. Other mechanisms, like the pervasive moral hazard that runs throughout China’s economy and results in large amounts of credit flowing to state-backed enterprises, are not typically considered subsidies but have subsidy-like effects of distorting the economy and altering industrial outcomes.

Most of these unconventional state support mechanisms are not easily addressed within the WTO system, in part because they are systemic, pervasive, and cannot easily be identified as benefiting certain sectors or companies in particular. In particularly, they pose challenges under the WTO’s SCM Agreement because they do not amount to a financial contribution by a public body—but rather by corporate actors (banks, investors, other firms) or by consumers (market restrictions leading to higher prices). Nonetheless, they have large distortive effects, particularly due to the large scale of their use in the Chinese economy.

In the next sections, we define and contextualize each instrument, provide an estimate of their scale in China’s economy where available, and discuss their countervailability in the China context.

Conventional state support mechanisms

Conventional state support mechanisms are subsidies that are broadly used in and outside of China and are well-researched. They include budgetary support (through direct grants, tax rebates, and other mechanisms), below-market finance (borrowing and equity), and inputs provided at below-market prices.

Estimates of China’s use of each of these instruments vary (Figure 1), but all point to a significant scale. OECD research covering firms in 13 sectors between 2005 and 2019 estimates that Chinese state support spending amounted to 4.5% of the revenues of Chinese firms covered (against 0.69% in OECD countries) with more than half being below-market borrowing. More recent OECD reports on the wind and solar value chains and the automotive industry also found that Chinese firms generally receive larger subsidies relative to their revenue than firms based in OECD countries. CSIS research found China’s industrial policy spending to be $248 billion in 2019, or 1.73% of China’s GDP. A MERICS study from 2023 on the medtech sector in China estimated that between 2017 and 2022, state support was equivalent to at least 5.3% of company revenue on average, with more than half through tax benefits. The EU Commission’s implementing regulation of 3 July 2024, imposing a provisional countervailing duty on imports of new battery electric vehicles, found that direct grants, below-market inputs, as well as non-loan types of financing, were the three largest channels of state support.

Budgetary support

China’s budgetary support takes two main forms: direct transfers of funds (such as research grants, operating grants, and other cash transfers) and foregone tax revenue (including preferential tax rates, tax credits and rebates, whether they are for investment, R&D, or other purposes). China also uses other forms of budgetary support, such as underpricing government goods and services, but they are more difficult to track.

Direct grants

Definition: Direct grants are financial contributions provided by governments or other organizations to businesses without the expectation of repayment. They can be operational (provided to cover day-to-day expenses and operational costs of the company) or non-operational (for purposes outside of regular operational expenses, often linked to specific projects or investments). From a corporate accounting perspective, direct grants can either be counted as income or deducted from the cost of capital expenditure.

Amounts and evolution: Over the past decade, direct grants to Chinese listed companies have grown at a relatively rapid pace, particularly since 2016—though they have stagnated as a share China’s GDP (Figure 2). The average amount of grants received by listed companies in China increased by 67% between 2016 and 2023, while China’s GDP officially increased by 70% over the same period.

Moreover, the median amount of subsidies received, as well as the median grants-to-revenue ratio, has stagnated since 2020, an indication that more funding is concentrated in larger companies (Figure 3). This stagnation may be due to growing fiscal constraints, particularly for local governments that are responsible for funding the majority of direct grants. However, direct subsidies to certain sectors, like the electric vehicles industry, have grown much faster in the past few years.

Disbursed amounts tend to match China’s announced industrial policy priorities, but also often reflect broader objectives of economic and social stability. In recent years, companies in strategic sectors targeted by the Made in China 2025 strategy have seen comparable levels of support as other companies (Figure 4). This points to two non-exclusive realities: China’s industrial policy priorities tend to span a wide range of sectors, and economic and social stability objectives also drive state support—especially since the COVID-19 outbreak.

Virtually all large, listed Chinese firms receive government subsidies in one way or another. Since 2007, the proportion of subsidized companies in all Chinese A-share companies has remained above 70%, growing to more than 90% after 2010, and as much as 98.58% in 2020. Moreover, data from listed companies shows that, when controlling for size, listed SOEs receive less direct grants than private peers.

Data is harder to collect for non-listed companies, but OECD reports have pointed out subsidies to non-listed SOEs such as COMAC, AVIC, or Baowu are much larger than those to most listed companies in their sectors. The OECD reports also showed that Chinese SEOs are larger recipients of subsidies than other China-based firms.

The analysis is also limited by inconsistent financial reporting by Chinese firms and frequent changes to disclosure rules on what qualifies as a subsidy, making it harder to track and compare subsidy data over time.

International comparison: Direct grants are not specific to China, but the amounts disbursed in China through direct grants have been found to vastly exceed those in other OECD economies. According to the CSIS Red Ink report from 2022, Chinese direct grants, both in absolute terms and as a share of GDP, vastly exceed amounts in other surveyed countries (Figures 5 and 6).

Countervailability: The Chinese government provides various kinds of grants to different types of enterprises (Table 2). The most commonly used forms of direct subsidies are R&D and industrial upgrading grants, which together account for more than half of all amounts disbursed since 2003. Both are seemingly horizontal and non-sector-specific. However, in practice, they often target certain sectors and technologies that the government wants to promote.

Some grant schemes even discriminate against foreign players, like the subsidies for electric vehicles. Between 2015 and 2019, EV carmakers had to use batteries from a catalog of recommended domestic suppliers to obtain state subsidies. Beyond the battery sector, foreign firms in all industries report that subsidy provisions widely discriminate against them. A vast majority of respondents to the European Chamber of Commerce’s Business Confidence Survey in 2021, for example, reported being aware of subsidies offered to Chinese firms that foreign firms could not access.

However, certain grants are also allocated to foreign firms that align with Beijing’s strategic objectives. In the EV industry, foreign carmakers have received significant state support for their China operations to encourage them to shift production and export capacity from Europe to China. The EU Commission’s investigation on imports of battery electric vehicles, for example, found Tesla to have received substantial direct grants from the Chinese government.

In practice, direct grants have often been used in countervailing cases. A study of 45 CVD orders imposed by the US Department of Commerce on China between 2008 and June 2017 shows that grants were one of the most common forms of state support mentioned in cases regarding subsidies granted by Chinese local governments.

However, the dense tangle of local governments handing subsidies to companies—often without clear policies—makes it difficult to prove that they are countervailable. For example, of the grants disclosed by Chinese rolling stock firm CRRC in 2022, only 3% were issued by the central government and 3% by provincial governments, the rest being sub-provincial governments. This makes subsidization particularly opaque and difficult to address within the WTO’s SCM Agreement framework.

Tax concessions

Definition: Tax concessions are a widely used form of support in China. They include preferential tax rates for certain industries, broad-based tax deductions for R&D, and the exemption or reduction of corporate income tax for selected industries (Table 3).

Amounts and evolution: China’s use of tax concessions has greatly expanded over the past decade and is a crucial part of China’s state support system, given its centrality in China’s S&T funding effort, as well as a tool to promote the emergence and growth of start-ups in strategic industries like medical technologies or biotech. China’s Bureau of Taxation reported that R&D tax incentives alone amounted to RMB 1.3 billion in 2022 and grew by an average of 28.5 percent every year between 2018 and 2022. In R&D-intensive and strategic sectors, they account for a large part of conventional government support. According to a 2023 MERICS study on the medtech industry, tax concessions were the single largest channel of subsidies in 2022, above direct grants and below-market finance.

International comparison: Tax concessions are not specific to China but, just as with grants, the scale in China exceeds that seen in other economies, both in absolute terms and as a share of GDP (Figures 7 and 8). A study by the OECD found that firms based in China were the largest recipients of tax concessions as a share of their revenue as well: 0.75% of annual revenue, against 0.32% for OECD-based firms, 0.28% for India-based firms, and 0.47% for firms based in other jurisdictions covered. These numbers may even overestimate how much OECD countries give out as tax concessions since they report amounts disclosed by firms, many of which are multinationals and receive their tax concessions from countries other than their headquarters country.

Countervailability: China’s use of banned tax incentives has been vastly reduced over the past two decades. Among all the countervailing investigations against China in the early years following its entry to the WTO, the main complaints were against China’s tax incentives, such as specific tax reductions and exemptions or specific tax preferences related to exports or imports. Subsequently, China canceled all its official export-oriented tax incentives.

However, certain tax incentives are still likely to constitute actionable subsidies under the SCM Agreement in the WTO, such as the corporate income tax reduction for high and new technology enterprises, whose list is stipulated in the Measures for Administration of Accreditation of High-Tech Enterprises (also named Circular 32) from 2016. In that circular, eight fields are recognized as high and new tech fields: 1) electronic information, 2) biology and new medicine, 3) aerospace, 4) new materials, 5) high-tech services, 6) new energy and energy saving, 7) resources and environment, and 8) advanced manufacturing and automation. The European Commission, in its 2024 EV investigation, estimated that this tax concession scheme was countervailable as it explicitly limits access to a subsidy to certain sectors. It also found other schemes countervailable, such as the preferential pre-tax deduction of research and development expenses, and the accelerated depreciation of equipment used by high-tech enterprises.

Below-market finance

Below-market finance includes below-market borrowings and equity. It can be defined as the provision of loans or equity finance at more favorable terms than the market would otherwise provide. This includes practices such as lower interest rates, longer repayment periods, and lower returns on equity. While China is not unique in using this type of subsidy, it uses below-market finance at a much larger scale than other countries.

Below market borrowing (loans and bonds)

Definition: Below-market borrowing can occur when a government directs financial institutions to provide finance on preferential terms, or when the government provides an explicit or implicit guarantee, reducing the firms’ ultimate borrowing costs by reducing repayment risk. These government guarantees do not always need to be explicit but can also simply reflect the market anticipation of government support—i.e., an implicit government guarantee that increases access to financing and lowers interest rates to below-market rates.

Globally, below-market borrowing tends to be concentrated in heavy industry sectors that have high debt-to-asset ratios. As a share of firm revenues, OECD research showed that aluminum, cement, glass and ceramics, and solar PV panels were the most affected sectors. But in China, SOEs and strategic sectors targeted by industrial policy goals often enjoy lower interest rates. Within a sample of all listed companies in China, central SOEs have lower effective interest rate on debt than private companies since 2018 (Figure 9). They also enjoy interest rates that are systematically below the loan prime rate (LPR), a benchmark monthly calculated by the People’s Bank of China that reflects the rates commercial banks offer to their best customers​.

Certain sectors, typically those considered strategic in China’s industrial policy, also enjoy much lower average interest rates than other sectors, consistently lower than the benchmark LPR. That said, this rate is also affected by many other factors, including company size and industry (Figure 10).

International comparison: Below-market borrowing is not specific to China. For example, Germany’s federal government guarantees SME loans, resulting in below-market interest rates. Many governments’ policy responses to COVID-19 have included job-retention schemes, increased unemployment benefits, and loan guarantees for businesses. Many central banks have also ramped up their outright purchases of corporate bonds to support liquidity in credit markets. This includes, for example, the US Federal Reserve’s Primary and Secondary Market Corporate Credit Facilities, as well as the Main Street Lending Program, which supported lending for businesses in the US before all three programs lapsed in January 2021.

However, below-market borrowing in China is more pervasive. This is, in part, because its bank system is much more state-dominated than in most other countries (Figure 11). As 2024 OECD research has shown, the six largest state-owned commercial banks (the “Big Six,” including Agricultural Bank of China, Bank of China, Bank of Communications, China Construction Bank, Industrial and Commercial Bank of China and the Postal Savings Bank of China) held, as of end-2023, 41.7% of all commercial bank assets in China. The Chinese government, through the Ministry of Finance, Central Huijin Investment (a state-owned investment company), and other state-owned companies, remains the majority shareholder in these six institutions. Chinese authorities also retain a controlling stake in joint-stock commercial banks even when they are not majority-owned by the government.

As a result, existing measures of below-market borrowings show that China provides much more below-market borrowings than the OECD average as well as other countries like India and Russia (Figure 12).

In a range of sectors, Chinese firms have also benefited from much larger amounts of below-market borrowing than their global peers. An OECD study focusing on the rolling stock industry found that China’s state-owned rolling stock manufacturer CRRC alone obtained almost 60% of all the below-market borrowings identified in a sample of 22 firms during the period 2016-2020, while it only had a 24.3% global market share in the rolling stock sector (Figure 13). Below-market borrowings were nonetheless found to be much smaller than tax concessions and direct grants for that company. In other sectors, OECD research found that below-market borrowing had a much larger role in overall state support. For example, it estimated that the Chinese aluminum company SPIC received more than half of its government support through below-market borrowing over the period 2013-2017.

Countervailability: Below-market borrowing in China has often been used in CVD investigations. A study on forty-five CVD orders imposed by the US Department of Commerce (USDOC) on China between 2008 and June 2017 shows that preferential loans provided by state-owned commercial banks such as the Big Six, and policy banks, such as the Export-Import Bank of China, are often used in investigations.

However, including below-market borrowing in CVD investigations can be difficult. For one, state-owned banks do not always qualify as a public body (interpreted by the WTO Appellate Body in past cases as “an entity that possesses, exercises, or is vested with governmental authority”). State ownership of banks itself is sometimes difficult to prove in China, where government stakes are indirect and ownership structures often opaque. Still, considering companies as state actors is not impossible, and many subsidy investigations by the US and Europe in recent years have done so. A 2019 WTO Appellate Body report further found that the US’s identification of certain SOEs as public bodies was not inconsistent with Article 1.1 of the SCM Agreement.

Another hurdle is determining the market benchmark to assess whether a loan was provided at a below-market rate. Because below-market borrowing is so prevalent in China, local market benchmarks are often heavily distorted and unreliable. Nonetheless, this challenge is not insurmountable. The US and the EU justify using out-of-country benchmarks in CVD investigations by pointing to significant distortions in the Chinese economy—through China’s designation as a non-market economy in the US and via a case-by-case assessment of distortions in the EU. This approach has already been partly applied in investigations such as the European Commission’s recent case on subsidies for electric vehicles, where an international credit risk premium was used to determine whether financing terms deviated from market norms.

Overall, however, the widespread use and implicit nature of government guarantees, as well as the lack of clear policy underpinning these practices, generally raises the bar when trying to prove the specificity of the distortion to certain sectors or companies and makes investigations into Chinese subsidies more challenging.

Below market equity

Definition: Below-market equity happens when investors are willing to accept lower returns on equity than they would under normal market conditions. Investors can be government agencies, state-owned financial institutions, or other financial institutions that are influenced by the state.

International comparison: According to OECD research, on average, government-invested Chinese companies receive similar amounts of below-market equity as their OECD peers, but far more companies are covered (Figure 14).

However, far more firms in China are state-invested, and far more investors are state-controlled, so the total amount of below-market equity in China is likely far greater than in other countries (Figure 15).

The large number of state-invested firms, in particular, has grown with the development of government guidance funds (GGFs). First rolled out in 2005, GGFs have become a key tool for China’s industrial policy, investing growing amounts until 2020 (Figure 16). They are government-established funds, funded from various sources, including general fiscal budgets, government-managed fund budgets (whose revenues are mainly land sales proceeds), or SOE operation budgets, but the exact source of funding is often not explicitly disclosed. The government usually helps establish a parent fund, which typically does not directly engage in venture capital business but invests as a limited partner in several sub-funds established in cooperation with private capital. The now-infamous China National Integrated Circuit Industry Investment Fund, set up in 2014, is one such example. In the first phase, it raised $19.5 billion to invest in China’s domestic semiconductor capabilities, followed by $28.7 billion in the second phase in 2019 and $47.5 billion in the third phase in 2024. Although new GGF establishment peaked in 2015–2017, they remain a staple of state support, with more than 150 new funds being created annually over the past six years.

Even when they do not provide capital at below-market costs, GGFs can create subsidy-like effects for targeted companies, first because of the sheer availability of capital that they deploy for state-backed actors and second because of their signaling effect that steers the allocation of private resources.

GGFs were intended to focus on strategic sectors, and their investment was concentrated in a handful of companies, mostly state-owned. Throughout the 2008–2022 period, although 37,000 entities received GGF money, 50 percent went to only 150 companies, 20 of which were private, while the rest were central and local SOEs. In addition, sectors typically supported by local governments to power local economic growth, such as the infrastructure and transportation sectors, received the largest share of GGF investment over the past 15 years (Figure 17).

Countervailability: In theory, below-market equity can be included in CVD investigations—and has been in a few rare cases. For example, in its CVD case on hot-rolled flat products of iron, nonalloy, or other alloy steel from China in 2023, the EU Commission concluded that debt for equity swaps constituted a financial contribution in the form of equity infusion or loan.

However, in practice, below-market equity is even harder to classify as a subsidy under WTO rules than below-market borrowing. It faces all the same challenges as below-market loans, but with an added complication: it can only be identified after the fact, by examining the returns generated in the years after the government injects capital. The WTO’s SCM Agreement, however, only considers the initial equity injection itself—not the long-term financial impact—making it difficult to prove as a subsidy in trade investigations.

Nonetheless, politically-driven provision of equity may be countervailable even if it is not possible to prove a difference with an estimated market price. The SCM states that “government provision of equity capital shall not be considered as conferring a benefit unless the investment decision can be regarded as inconsistent with the usual investment practice (including for the provision of risk capital) of private investors in the territory of that Member.” In other words, if a government invests in a way that a private investor operating under normal market conditions wouldn’t, it could be classified as a subsidy. This would be the case, for example, if GGF investment concentrates more heavily on sectors and companies prioritized by state priorities than a non-state-linked fund would have. The EU Commission’s July 2024 implementing regulation on imposing a provisional countervailing duty on imports of new battery electric vehicles cites government guidance funds investment as a subsidy, pointing to the industrial objectives pursued with these transactions and arguing that it did not follow a purely market logic and did not reflect the actual market risks associated with the transactions investigated.

Provision of goods and services at below-market cost

Governments sometimes supply resources to businesses at lower prices than they could get in the open market. This constitutes a form of subsidy, as it provides an economic advantage to the recipients, enabling them to reduce their production costs and enhance their competitive position both domestically and internationally. These can include lower rates for raw materials, energy, or transportation.

Land

Definition: Below-market land provision happens when governments use their ownership of the land to grant preferential and cheaper access to land use rights to certain companies they want to support. This can happen either through the rental or purchase of land rights.

International comparison: Below-market land prices are not entirely unique to China. Some European countries, for example, provide cheap land for social and affordable housing. OECD research uncovered instances of below-market land provision in Gulf countries, for example, leases free of rent for petroleum companies in Bahrain. But the unique structure of China’s land ownership (Table 4) creates much greater opportunities for shaping the price of land according to industrial policy objectives.

Amounts and evolution: Substantial, but declining amounts are disbursed through this form of state support. According to a 2019 CSIS study, an estimate of 206 billion yuan ($30 billion), or 0.21% of Chinese GDP, was disbursed through below-market land sales in 2019. Earlier IMF estimates found that below-market land provision was more than 1% of GDP from 2010 to 2015, but that land subsidies had declined significantly in GDP terms over time.

Offering land at below-market prices is not limited to specific companies or sectors: It reflects a systematic bias that benefits the entire industrial sector. Local governments in China compete with each other to attract companies through lower pricing of land leaseholds for industrial usage. This leads to an extreme price differential between residential and industrial land. A research paper from 2022 showed that in 2019, land zoned for residential use sells at roughly a ten-fold higher price than land zoned for industrial use.

Energy

Definition: Below-market energy provision refers to governments or other entities supplying energy (electricity, natural gas, oil, etc.) to consumers at prices lower than the market rate or below cost where a market does not exist. This can involve selling energy at a discount or providing subsidies to lower the price consumers pay.

Amounts and evolution: In the early 2000s, the Chinese government used electricity price regulations and quotas under which thermal plants were guaranteed a portion of projected demand, and electricity prices determined by provincial and local authorities. In 2015, China began to allow market pricing of energy and electricity trading on provincial markets. However, although power prices are now allowed to fluctuate within a wider band, the government still allocates quotas to generators.

Energy prices are also subsidized nation-wide through upstream subsidies to energy producers. Coal plants, renewable energy producers, and upstream equipment manufacturers are subsidized, in turn allowing them to provide electricity at cheaper costs. For example, to incentivize the development of data centers, many governments, including the municipal governments of Ganzhou, Gui’an, Karamay, Yangquan, and Zhongwei and the provincial governments of Guizhou, Henan, and Inner Mongolia have provided data centers cheap electricity rates since 2015. The centers get rates at or below 0.35 RMB/kilowatt hours (kWh), significantly lower than the industrial electricity rate in China of 0.6–0.8 RMB/kWh ($0.085-0.11/kWh). Overall, the IEA estimates that China’s electricity subsidies amounted to $242 billion (in 2020 prices) over the period 2010-20, corresponding to an annual average subsidy of $22 billion.

International comparison: Despite large-scale subsidization of energy in China, according to OECD research from 2023, China’s energy subsidies for industrial users are roughly in line with the OECD average and much lower than those practiced in some Middle Eastern countries and Russia. Nonetheless, Chinese energy subsidies in specific sectors or localities can reach much larger amounts and have a more sizable distortive effect (Box 2).

Other inputs

While land and energy are the most obvious subsidized inputs in China like in other countries, all other intermediate inputs can be subject to market distortions. Those distortions are more difficult to prove though, because they often happen informally behind closed doors.

A research paper by Haley and Haley (2013) showed that local governments in China often required SOEs to provide inputs at below-market or even below-cost prices to other SOEs or state-backed producers. More recent OECD research on state support in the aluminum sector showed that cheap inputs have enabled Chinese producers of aluminum semi-finished products (or semis, for short) to compete in global markets at lower costs. It found that a local SOE, Binzhou Gaoxin, provided the privately-owned listed company Hongqiao below-market price inputs. Hongqiao’s own disclosures noted the SOE was responsible for implementing the local government’s development plan by ensuring the stable supply of raw materials for the industry.

The same OECD report also highlighted how China’s incomplete VAT rebates and 15% export tax on primary aluminum kept China’s excess supply domestic, lowering prices for downstream industries. As a result, Chinese producers of aluminum semis and processed articles of aluminum were able to compete in global markets at lower costs and quickly gain global market share.

Countervailability

The provision of inputs at below-market cost has often been used in CVD cases. The previously mentioned Department of Commerce study of 45 CVD orders between 2008 and June 2017 showed that the most common type of Chinese subsidy programs determined to be subjectable to CVDs was providing below-cost goods. Some 80% of the cases involved SOEs providing low-cost raw materials, such as hot-rolled steel, polysilicon, and chemicals. Roughly 70% of cases included government provision of electricity. Similarly, in 2024, the EU Commission found Chinese carmakers had benefited from artificially cheap batteries and key inputs for their production, namely lithium iron phosphate.

Applying WTO SCM rules to below-market inputs is a challenge. Providers are often state-owned enterprises, rather than governments, making attribution more difficult in China, where political authority is diffuse, opaque, and not easily traceable. Another obstacle to countervailability is the need for a benchmark to prove the existence of a benefit—something that is difficult to reliably establish in China, where market prices are severely and systemically distorted. Lastly, proving specificity is a challenge. For example, if a cheap, fixed rate of electricity is offered to all industrial users within a specific province or municipality—even if they do all happen to be SOEs—may not be considered specific under the WTO SCM Agreement.

Workarounds to these challenges exist. As noted above, the US and the EU justify using out-of-country benchmarks in CVD investigations by pointing to significant distortions in the Chinese economy. This approach has been employed in previous cases, such as the EU’s investigation into electric vehicle subsidies, where Taiwanese land prices were used as a benchmark to calculate land subsidies. However, the opaque and implicit nature of these arrangements in China makes the legal bar for proving the existence of a benefit and specificity high and complex.

Non-conventional state support mechanisms

A politically-driven and expansive financial system

China’s state support to its firms differs from many other OECD economies in two key respects: the highly political nature of how financial resources are allocated, and the scale of financing made available—both ultimately stemming from pervasive implicit and explicit state guarantees for state-adjacent and -guaranteed actors. This created a highly supportive environment for firms considered a political priority, with some of the same effects as more conventional subsidies.

Politically-driven allocation of credit

Definition: Despite three decades of reform and growth of market forces in China’s economy, the allocation of credit remains deeply influenced by political considerations. In China’s bank-dominated financial system, all banks are state-owned or state-linked to some degree. Bank lending decisions are still shaped by credit guidance from the government, as well as by a range of implicit and explicit guarantees, which concentrate lending around a set of politically favored actors.

Explicit guarantees are formal state assurances to certain borrowers including large state-owned enterprises and local government financing vehicles (LGFVs). LGFVs are quasi-fiscal entities created by local governments to raise funds for public infrastructure projects and urban development, enabling local authorities to finance investments without directly adding to their official debt levels.

Implicit guarantees are the broad-based belief among lenders and investors in China that certain economic actors—especially state-owned and state-backed firms—are backed by the state and are therefore “risk-free.” In other words, banks expect that state institutions would automatically rescue these borrowers if they risked going bankrupt. State-owned institutions also generally hold more fixed assets as potential collateral relative to private firms, which allows them more opportunities to pledge the collateral when borrowing.

In addition to guarantees, credit allocation in China is shaped by quantity-based targets. These include quotas and loan growth targets to maintain stable credit growth and bolster credit to preferred companies like SOEs and, increasingly, advanced manufacturing firms. According to the IMF, quantity-based policies have risen in China in recent years because the government sees them as “targeted” economic support, rather than the “flood-like” credit stimulus that followed the 2008 crisis.

These characteristics of China’s financial system make banks more likely to tailor their lending to high-level state objectives than in other countries. It also leads banks to lend more easily and in larger amounts to state-owned or state-linked borrowers. This skewed credit allocation can have some of the same effects as a subsidy, as abundant financial resources create softer budget constraints for state-backed actors. This lets Chinese firms in key sectors lower prices, take greater risks, and invest more without fear of bankruptcy.

The implicit guarantees particularly apply to SOEs. While the IMF estimated in 2021 that Chinese SOEs accounted for some 39% of total industrial corporate assets, they made up 54% of outstanding bank loans in 2016. Official statistics were discontinued after that year, but data at the firm level shows that state-owned firms have retained their share of listed firms’ outstanding bank loans since then, at around 66%.

But SOEs are not the only companies enjoying implicit guarantees and credit guidance. State-directed economic targets encourage lenders to extend substantial financing to specific sectors and actors, based on Beijing’s perceived support. Political targets and national policy plans (such as the Made in China 2025 roadmap) are mentioned in major banks’ reports as key guidance for the allocation of loans. For example, the ICBC’s 2023 annual report stated that “guided by the strategies of building a great power in manufacturing and science & technology, the Bank served the breakthroughs in core technologies of key industrial chains, and actively supported high-quality advanced manufacturing enterprises.”

As a result, sectors flagged as national priorities by the government tend to receive more capital than they would in a more market-driven environment. In the early 2010s, Chinese solar photovoltaic (PV) firms received ample loans at low interest rates, with little regard for firm productivity. This led to an oversupply of PV cells, undermining the competitiveness of non-Chinese firms in the industry (Chen 2015). More recently, between 2018 and 2023, the semiconductor sector saw the largest increase in corporate bank loan amounts within listed manufacturing firms, tripling its credit amount.

Access to the bond market is also largely skewed toward SOEs and quasi-fiscal LGFVs, which invest in real estate and infrastructure but also in a wide range of industrial sectors. By the end of July 2023, LGFVs accounted for 55% of the RMB 10 trillion in CSRC-managed corporate bonds and 86% of all PPNs (Private Placement Notes, which are privately placed but listed in the interbank market). LGFVs were only 19% of publicly issued corporate bonds and around one-third of MTNs (Medium-Term Notes, which are debt instruments typically issued with maturities of 3-5 years) and commercial paper (Figure 18).

The government’s implicit guarantees explain the discrepancy: Despite only accounting for a small share of corporate bonds and being less likely to make losses than SOEs, private companies account for the majority of onshore bond default amounts (Figure 19).

International comparison: Politically-driven or -influenced credit allocation is not specific to China. In the 1970s and 1980s, state-directed credit policies played a pivotal role in South Korea’s rapid industrialization. Policy loans accounted for around half of the country’s total credit in the 1970s and were mostly directed toward export-oriented firms and heavy and chemical industries, enabling their rapid expansion. Just like in China, the policy led to inefficiencies, rising non-performing loans (NPLs), and moral hazard.

China, however, is an outlier for three reasons. First, the uniquely high share of public ownership in its banking sector and real economy allows for a strong control over credit allocation and widespread implicit guarantees to SOEs. Second, China remains a largely state-driven economy, with the Party maintaining a strong grasp on the economy through party cells in both state-owned and private companies and placing an ongoing emphasis on state planning, like Five-Year Plans. Third and finally, the size of China’s financial system (about 55% of global GDP) and of its economy (the world’s second largest at $17 trillion) makes such distortions much more decisive for domestic actors and much more disruptive to global markets.

Chinese authorities have begun shifting away from implicit guarantees, allowing some local SOEs to default on corporate bonds in recent years. This began with the default of power equipment manufacturer Baoding Tianwei in 2015, an event viewed as a milestone for market discipline in the Chinese corporate bond market. However, the Chinese government remains wary of the widespread propagation of financial risk and continues to prevent larger SOE defaults, maintaining a high level of implicit guarantees. There have been no defaults of LGFVs on their publicly traded bonds, although several have defaulted on loans and corporate acceptances. This dual approach aims to introduce market discipline while avoiding the destabilizing effects of widespread defaults, reflecting a cautious balancing act.

Many of these distortions result from China’s financial system being a tool of its political system. Political incentives add to the distorted economic incentives of borrowers and lenders in skewing market forces. Whereas in most developed economies, companies appeal to banks to grant them loans, in China, the situation is often reversed: Banks will compete with one another to extend loans to state-owned enterprises, national champions, strategic start-ups, or local governments. China’s economic targets are designed for political objectives—a high and stable rate of economic expansion, employment growth, and technological upgrading—rather than financial stability. All banks in China are state-owned or controlled at some level, local governments try to place their own officials in banks and banking regulators, and the central bank explicitly answers to the State Council. The fact that China’s political ambitions have outpaced China’s potential economic growth over several years has forced the financial system to absorb unprecedented losses.

Evergreen credit and tolerance for poor performance

Definition: Because of the political incentives shaping China’s financial system, banks in China tend to extend or roll over debt to poorly performing or loss-making companies. This can have some of the same effects as a subsidy, by removing incentives for companies to stay profitable and isolating them from market forces that would otherwise lead to their restructuring or bankruptcy. It is the substitution of financial risk for political risk. Evergreening of credit, therefore, allows firms to take more risks than they would in a market environment, reducing domestic and global prices to unprofitable levels, and expanding scale faster than in a market-driven environment.

This kind of behavior is not only specific to China. Research showed evidence of credit “evergreening” among Japanese firms in the 1990s, when banks followed a policy of forbearance with their problem borrowers in order to avoid pressure on the banks to increase their own loan loss reserves, which would have further impaired their capital. During the pandemic, many countries deployed large-scale forbearance programs that allowed millions of households and businesses to temporarily stop making payments on certain debt obligations.

But it is particularly prevalent and systemic in the China, beyond temporary responses to the COVID-19 pandemic. Much like in Japan in the 1990s, “troubled (…) banks have an incentive to allocate credit to severely impaired borrowers in order to avoid the realization of losses on their own balance sheets,” and lenders more broadly have an incentive to align with political imperatives to avoid significant job losses.

Part of the evergreening problem is simply related to the structure of lending for quasi-fiscal infrastructure projects. Because Chinese banks assume that local governments and their financing vehicles will always be guaranteed, they often extend short-term loans to finance long-term projects that are not expected to provide operating cash flows for years. This allows localities to benefit from lower interest rates.

Some concrete data points suggest that China’s evergreening of debt is more widespread than is commonly the case in most market economies. The ratio of banks’ reported non-performing loans has decreased over the past years, while the share of loss-making enterprises increased (Figure 20). This would indicate Chinese banks have been sitting on large volumes of NPLs that have not yet been fully recognized. This is an open secret: The National Audit Office recently claimed in an annual audit report to the NPC that 16 of 43 audited banks last year had NPL levels that were double the officially reported figure. The practice of using bond proceeds to repay existing debt is likewise widespread, as seen recently with China Chengtong Holding Group.

Loan rollovers are a pervasive phenomenon in China. They were especially prominent after 2012, when post-2009 stimulus loans needed to be extended and shadow lenders emerged to help banks hide loans off their balance sheets. As difficulties mounted in the real estate sector, political messages from Beijing encouraged banks to provide loans to sectors and companies in distress. For example, central bank governor Pan Gongsheng stated in August 2023 that the PBOC should provide support for developers’ “reasonable financing demands.”

The economic downturn from COVID-19 again worsened the situation by triggering new volumes of loans that are not being repaid and will need to be rolled over again in the future. This was explicit state policy during the pandemic, and banks would publish the volume of loans that they were rolling over to small and medium-sized enterprises. The CBIRC has said that Chinese banks have already postponed repayment of RMB 1.44 trillion in maturing small and medium enterprise loans, out of a total of RMB 13.08 trillion in loans to SMEs (Figure 21). This also includes relatively large companies, as the Chinese government defines SMEs at a larger size than the OECD does. As a result, many companies were kept alive artificially, compounding the problem of “zombie companies” in China, whereby non-viable firms do not file for bankruptcy and continue to produce despite making continued losses.

In this context, many Chinese firms have been able to keep prices artificially low compared to production costs—despite many running into losses. The potential effects on global markets (downward pressure on prices, quick capture by Chinese firms of global market share, etc.) are similar to more traditional subsidy schemes. In other words, the financial system had served as a shock absorber, channeling resources to enterprises facing losses to maintain output and prevent the defaults and bankruptcies that occurred in market economies.

Politically motivated abundance of credit

Definition: China’s financial system has expanded massively over the past 15 years—faster than might have been expected in a normally functioning market economy. In fact, that growth has been unprecedented in global and historical terms—since 2008, China has added bank assets equivalent to around 41% of global GDP in only 15 years. Although the pace of credit growth has slowed since 2016, it remains well above the pace of economic growth.

This happened for two reasons. From a micro perspective, banks’ state-owned status meant they were perceived as low-risk borrowers, giving them the ability and incentive to grow larger as fast as possible in order to take market share from their competitors. From a macroeconomic perspective, lenders were also incentivized or ordered to increase credit volumes to maintain high levels of economic growth and serve national objectives. The targeted pace of credit expansion was set based on politically motivated economic growth targets, rather than the pace of investment that could be financed sustainably.

This abundance of credit allowed for a swath of redundant firms in strategic or politically encouraged sectors, in the hopes that one of them would grow to become a fierce global competitor. Widely abundant and available credit has also allowed Chinese firms to scale up their activities more easily than would have been the case in advanced economies, capturing market share and building economies of scale faster than their foreign counterparts.

International comparison: In theory, politically-motivated credit expansion is not unique to China. However, historical examples of large-scale, state-driven financial expansion with similar characteristics are difficult to find. For example, while Japan and South Korea implemented ambitious industrial policies during their high-growth periods, their financial systems did not experience the kind of rapid, debt-fueled expansion seen in China. In contrast, China has experienced the single largest credit expansion in global history. Bank assets in China expanded at an average rate of 18% from 2007 to 2016, and even after those growth rates were cut in half from 2017 to 2019, China’s banking system still produced an average of $2.8 trillion in new bank assets per year, roughly the size of the entire economy of France. This compares to around $622 billion in new bank assets per year in the United States, though this is not a direct apples-to-apples comparison as the US has a more diversified financial system and does not depend solely upon bank lending (Figure 22). Consequently, China’s banking system has nearly septupled in size since 2008, reaching $58 trillion in total assets in 2024. And despite being a middle-income economy, China has by now overtaken both the US and Germany in terms of credit to the non-financial sector as a percentage of GDP.

The politicization, inefficiency, and size of China’s financial system are seen as a risk and a challenge by the Chinese government. The deleveraging campaign that started in 2016 was in fact meant to address this systemic risk and slow down the growth of the financial system. But these features of China’s economy still remain, establishing broad-based soft-budget constraint for Chinese firms, who are more able than global competitors to invest, keep prices low, or take risks without having to fear many of the market consequences of such decisions.

These subsidy-like effects could persist in the coming years. Today, despite their efforts to rein in credit growth, Chinese authorities find themselves with limited options. They continue to drive credit expansion and implicit guarantees to sustain economic growth for fear of triggering a financial crisis if they change course. This reliance on credit expansion underscores the difficulty in balancing short-term economic performance with long-term financial stability.

Other non-conventional support schemes

Semi-fiscal expenditures on industrial parks

Local governments in China spend large amounts of public money to develop industrial parks, building factories, roads, and other infrastructure to support businesses. These facilities and land are then offered to companies at below-market prices, effectively giving them a financial advantage. Although not easily countervailable because of this systemic nature, the subsidized building of industrial parks and industrial real estate is a crucial aspect of China’s state support system.

Definition: Over the past two decades, local governments invested substantial resources in high-tech industrial parks to provide companies with the infrastructure and facilities needed to develop and scale up. In 2019, these zones hosted 40% of China’s high-tech companies, and provided cheap industrial real estate, including factory premises, office space, warehouses, R&D facilities, and residential buildings for workers.

Together with transportation, industrial parks constitute the largest expenditure item in local governments’ off-budget financing (Figure 23). A partial dataset of special revenue bonds (SRBs) in eight provinces (Guangdong, Shandong, Zhejiang, Jiangsu, Sichuan, Yunnan, Guizhou, and Xinjiang) showed that in 2024, spending on industrial parks amounted to RMB 362 billion, up from RMB 255 billion in 2021. The total amount is likely to be much greater because it should also include investment from quasi-fiscal LGFVs, which remain opaque. However, if other provinces dedicate a similar proportion of roughly 25% of SRB revenue to industrial parks, that would put the total at RMB 1 trillion.

The provision of abundant and cheap production infrastructure is one of the key ways local leaders support local industry. Because they draw much of their resources from land sales and corporate income tax revenues, local governments have an incentive to over-invest in this infrastructure, which leads to an oversupply of industrial parks, driving prices down.

International comparison: China is not alone in using fiscal resources to build infrastructure that benefits companies. South Korea, for example, established free export zones in the 1960s that provided many advantages for firms operating in the zone and was at least partly financed by the Ministry of Commerce and Industry. Similarly, India’s Industrial Development Corporation has financed the development of many industrial parks. In Ethiopia, industrial parks were financed through public investments often derived from external borrowing.

However, several aspects of China’s spending practices stand out. The first is the strategic targeting of specific sectors through industrial parks. The development of industrial parks follows political priorities. The Shandong 14th Five-Year Plan, for example, earmarks a number of key industrial parks for specific sectors, including automobile manufacturing, high-end chemicals, new energy, and biomedicine—all targeted in China’s high-level industrial policy plans. In practice, this leads to distortive fiscal spending that strategically favors certain industries.

China also stands out for the staggering scale of infrastructure investment for corporate use and the structural bias in public spending toward corporations at the expense of consumers. This emphasis on corporate infrastructure at the expense of household spending effectively reduces operational costs for businesses, particularly large and state-backed domestic enterprises. This support serves as an indirect subsidy, enhancing corporate profitability and competitive advantage of companies (either domestic or foreign) located in the industrial parks without direct financial handouts.

Countervailability: Although the provision of corporate facilities at below-market price is theoretically countervailable, in practice it has not been commonly used in past CVD investigations, partly because of its systemic nature and because of the difficulty of proving the price differential between an estimated market price and the actual price paid by companies.

Selective market access and a biased business environment

Definition: Although it has opened considerably to foreign trade and investment since the 1980s, China remains partially or fully closed to foreign players in many industries through both formal and informal restrictions. The strategic restricting or conditioning of market access and the selective enforcement of regulations, administrative processes, and standards to the benefit of local or state-backed actors are typical market-distorting industrial policy tools. They are not subsidies in the narrow sense of the term because they do not constitute a financial transfer from the state to enterprises. However, they have subsidy-like effects by providing undue advantages to certain (often local and state-backed) firms, helping them to increase scale and compete locally and abroad without concern for the same market constraints that apply to their competitors.

While it displays high trade openness at the aggregate level (see Rhodium Group’s Pathfinder reports), Beijing also formally prohibits or restricts certain imports through negative lists (e.g. the Imported Product List for medical devices), as well as foreign firms’ access to public procurement in a range of sectors. This is the case in the rolling stock sector, where formal restrictions on procurement have favored China’s two state-owned manufacturers, CRRC and CRSC. Foreign firms can only participate in tenders through joint ventures with local companies without a controlling share, and they must have a state-issued license, typically granted only to Chinese-controlled companies.

China has also made particularly strong use of FDI restrictions, although it is by no means unique in that regard. It also uses joint venture requirements to condition market access in other industries, such as general aviation and telecommunications services (Figure 24).

Overall, while the prevalence of market access and regulatory barriers varies by sector, it has overwhelmingly increased in the past few years. 58% of respondents of the European Chamber of Commerce in China’s annual Business Confidence Survey in 2024 reported missing business opportunities because of such barriers, up from 42% in 2022. These barriers result in significant disadvantages for foreign firms: In the same survey, a fifth of respondents who lost business opportunities as a result of market access or regulatory barriers report they would have been worth more than a quarter of their annual revenue. In some sectors such as pharmaceuticals, that proportion was as high as 93% (Figure 25).

China also informally restricts market access for domestic firms and, in some cases, selected foreign firms. Non-public circulars like the 2021 Guidance Standards for Review of Government Procurement Imported Products set detailed and quantified targets for the share of domestic products in goods procured by public institutions like hospitals. The slow or selective delivery of licenses and permits (e.g. medical devices approval) can also restrict or delay market access for foreign firms. This grants local players an artificially high share of the market or timing advantage over foreign peers, providing them with a competitive advantage in domestic and global markets.

Some of these informal restrictions include forced IP transfer as a quid pro quo for market access. This can involve “corporate structure requirements” where foreign investors in China have to partner with domestic entities as a condition of making an investment, either by forming a joint venture or affording Chinese investors a controlling equity stake. Forced IP transfers are very difficult to prove because they usually happen behind closed doors and cannot be traced. Companies are also reluctant to disclose their experience for fear of losing market access. Yet there is considerable evidence that forced tech transfers have been significantly more common and systemic than other countries. According to a report by the EU Commission in 2022, China is at the origin of 70% of suspected IPR-infringing goods in the single market. These transfers likely helped improve the performance and innovative capacity of domestic producers, producing a subsidy-like effect. The rolling stock industry is one of the most striking examples, where technology transfer contracts signed with CSR Corp. and CNR Corp. allowed Chinese engineers to quickly assimilate high-speed trains’ core technologies.

Altogether, formal and informal restrictions on foreign activities make China a significantly more restricted market than OECD countries. This is particularly true for high-tech sectors that China’s industrial policy designates as priority areas, in which Chinese firms have established very large market shares in the domestic market at the expense of their foreign competitors.

China’s government has also been found to enforce its own regulations and standards selectively to favor domestic enterprises, particularly state-backed and state-owned firms. Foreign firms operating in China have reported discretionary enforcement in a wide variety of fields, from the market access barriers noted above to environmental enforcement, tax, labor, and IPR rules (Figure 26). 24% of respondents of the EUCCC Business Confidence Survey in 2024 reported that these rules were intentionally misinterpreted by officials to disadvantage foreign companies in favor of local champions. Companies reported, for example, a particularly pronounced bias in the enforcement of environmental regulations, where European players typically have higher standards yet are subjected to far more regulatory inspections.

Discriminatory enforcement is perhaps most obvious in antitrust. With the Anti-Monopoly Law in 2008, China established a legal framework to promote market competition and curb monopolistic practices which it has increasingly used in recent years. However, there is strong evidence that the regulation has been enforced in a biased way that favors domestic players and discriminates against foreign companies and in favor of SOEs. According to OECD research, although M&As involving SOEs were reviewed by the State Administration for Market Regulation (SAMR), only one SOE transaction was not cleared unconditionally. All but two prohibited mergers (3) and mergers approved subject to remedies (59) in China concerned private enterprises. In contrast, all prohibited, and most conditionally approved mergers involved private firms, particularly foreign enterprises. Notably, SAMR often imposes conditions on foreign private company mergers that are unconditionally approved in other jurisdictions.

In fact, the Chinese government even encourages and, in some cases, forces industry concentration for SOEs through mergers and consolidations. Notable mergers have taken place across sectors including railway, shipping, mining, steel, and chemicals, leading to the formation of mega-enterprises with extensive industrial chains, in an effort to fortify central SOEs by increasing their assets and influence. This is exemplified by the creation of entities like the China Mineral Resources Group in 2022, designed to enhance China’s global bargaining power in key sectors such as iron ore. In many cases, this leads to a large market power and gives China’s SOEs the ability to influence prices and engage in anti-competitive behavior. Research has shown that, in many sectors, Chinese SOEs have engaged in market practices such as eliminating private competition by restricting supply, using discriminatory pricing, and segmenting the market to inhibit the emergence of competition.

International comparison: Selective market access restrictions have, of course, long been a form of industrial policy, particularly among emerging economies. In theory, their purpose is to protect domestic industries from outside competition until they are strong enough to fend for themselves and give a head start to national champions in their domestic and global developments. But these formal and informal restrictions are particularly high in China, due to the politicized nature of its economy, the high-level government emphasis on self-sufficiency, and the large role of local governments in protecting local companies against outside competition.

In the case of China, the mere size of the domestic market means these policies and practices can act as an even greater subsidy to Chinese firms. As shown in previous Rhodium Group research, protected access to the world’s largest consumer base allows domestic companies to scale up production more rapidly than foreign competitors, driving down costs and increasing efficiency. In many sectors, larger production volumes enable automation, reduce waste, and lower per-unit costs—giving Chinese firms a cost advantage over international rivals. Without pressure from external competitors, domestic firms can secure higher revenues and greater profits than they would in an open market. These profits allow them to invest more in innovation, scale up production, and refine their products, strengthening their competitive position before expanding internationally. Additionally, a stable home market insulates firms from external demand shocks, while preferential access to domestic consumers enhances their credibility and service efficiency. When entering global markets, these firms have the financial flexibility to undercut competitors on price, customize offerings, and develop more innovative or widely adopted products—giving them a distinct advantage over foreign rivals who never had the same level of protection.

The size of China’s market also means that foreign firms have tended to have a greater tolerance for China’s practices in terms of market access and business environment. This is particularly true of forced technology transfers—from requirements to set up JV or R&D partnerships with local companies, to outright IP theft tolerated by China’s justice system. Foreign companies have been incentivized to tolerate such practices and abide by China’s requirements in exchange for access to China’s particularly large market.

Countervailability: While these market-distorting practices provide significant advantages to Chinese firms, they are generally not countervailable under the WTO’s SCM Agreement. This is because they do not constitute a financial contribution by a government or a government-entrusted body, as required under the SCM definition of a subsidy. However, other WTO rules may apply to address some of these issues. For instance, Article III of the General Agreement on Tariffs and Trade (GATT) prohibits measures that treat foreign products less favorably than domestic products (national treatment). Measures such as forced technology transfers or joint venture requirements may also be challenged under the Trade-Related Investment Measures (TRIMs) Agreement, which bans investment-related trade practices that violate national treatment principles. While these legal avenues exist, enforcement is more difficult than for subsidies defined under the SCM Agreement as it typically requires WTO members to bring a dispute under the dispute settlement procedure. The Appellate Body—essential for resolving disputes—has been nonfunctional since 2019 due to the US blocking new judge appointments, meaning that even if a WTO member successfully challenges China’s practices, there is no higher-level mechanism to enforce compliance.

A systemic support system

China’s state-induced market distortions also go beyond any single policy. Several mechanisms create a systemic support system throughout the Chinese economy.

Coordination of corporate actors: Over the past decade, the CCP has significantly enhanced its ability to monitor, direct, and coordinate the behavior of companies to align with its broader industrial policy goals. Party cells and committees embedded within firms, in particular, have proliferated throughout the private sector and serve as institutionalized pathways for the CCP to participate in corporate decision-making processes. As of 2018, publicly traded companies in China are required to host Party organizations, and according to the CCP’s own estimates, around half of all private sector firms have established a Party cell. While originally responsible for simply internal matters of the Party, such as keeping track of Party members employed outside of the state and distributing propaganda, the scope of responsibility for Party branches has expanded to include influencing hiring decisions, directing their firm to contribute to national social goals such as poverty and disaster relief, and importantly, liaising between firms and the bureaucracy on major economic policy initiatives.

Beyond Party cells, the CCP has an array of tools at its disposal to influence corporate governance, including ‘golden shares’ (symbolic equity stake that grants power over certain business decisions), politically directed appointments of board members, preferential procurement policies, and public-private connections between SOEs and privately owned companies. All these tools have worked in concert to rein in what the government perceives as the ‘disorderly expansion of capital’ and ensure alignment between corporations and the Party on broader economic and security objectives.

Regulatory crackdowns: There is evidence that the Chinese government uses regulatory crackdowns on selected sectors of companies to discipline actors that deviate from Beijing’s strategic objectives. Crackdowns in e-commerce, fintech, ride-hailing, and other high-tech sectors in 2021 and 2022 wiped out billions of dollars in stock value, highlighting what regulators deemed disorderly capital expansion in the sector. Observers have interpreted it as an attempt to redirect investment toward strategic industries. Alibaba faced a record $2.8 billion fine for anti-competitive practices in 2021, following founder Jack Ma’s public criticism of Chinese financial regulators. Similarly, the ride-hailing giant Didi was subjected to severe data security probes after its US IPO, which was perceived as ignoring Beijing’s warnings.

Overall, coordination of corporate actors through political mechanisms lets authorities encourage companies to partner, merge and consolidate, coordinate to gain market shares, raise prices, restrict access to products where they already have substantial market power, or favor domestic firms in their suppliers and client networks. Non-Chinese companies are inherently unequal under this system, as they cannot commit the same quid pro quo relationship to the CCP that Chinese firms can and must.

Distortion of outcomes across the value chains: The widespread coverage of China’s state support across all industries and firm types distorts outcomes across value chains. Subsidies in upstream sectors contribute to supporting downstream sectors by artificially lowering intermediate input prices, as OECD research showed in the case of the aluminum sector (Figure 27). Support for aluminum smelting results in cheaper primary aluminum, which in turn accounts for 75% to 85% of the production costs for semi-fabricated products of aluminum such as extrusions and plates, and ultimately results in large price effects in downstream sectors such as aerospace, shipbuilding, and rolling stock companies. These effects are even more prominent given that the Chinese government strategically leverages export tariffs and restrictions to keep the price effect in-house.

The reverse effect from downstream to upstream sectors exists, too: subsidies to electric vehicle companies, for example, have boosted demand, juicing revenues and profitability for domestic battery makers. Again, the effect is even stronger given that the Chinese government strategically closes the market or access to subsidies for foreign players. This is the case in the EV sector, where large upstream subsidies were combined with discriminatory practices between 2015 and 2019 when the “Regulations on the Standards of Automotive Power Battery Industry” were in effect. These regulations created a catalog of recommended EV battery suppliers that met technical standards established by the government. According to the regulation, using batteries from suppliers in the catalog was a prerequisite for EV manufacturers to obtain state subsidies. The Chinese government only included 57 domestic auto battery makers in the catalog, meaning that foreign giants such as Samsung, LG, and Panasonic were excluded.

A whole of society effort : Market distortions in China are not only the result of government intervention, but also a much wider set of actors: private companies pressured to align with Beijing’s objectives, universities and researchers encouraged to follow state priorities when setting their research agenda, courts that take these priorities into consideration in their rulings, and the media that amplifies government messages. The concept of a “whole of society” effort, emphasized by the government in recent years, formalizes the idea that all actors of society are expected to pursue the objectives set by the party-state.

A built-in set of incentives : Lastly, these market distortions are not solely the result of explicit national policies or directives from the top. There are built-in incentives for various actors, particularly at the local level, to support producers in ways that make the system even more opaque. Local governments, grappling with fiscal constraints, are incentivized to support local manufacturing industries that generate large incomes and value-added taxes, while raising the demand for land from which they derive half of their revenues. This often involves competing with other localities to attract and retain companies, fostering an environment of intense support for businesses. These decentralized actions, motivated by local governments’ need to secure economic stability and growth, contribute to a complex and opaque web of support mechanisms that benefit domestic producers, making it difficult to disentangle and address the full extent of China’s market interventions.

International comparison: China is not the only economy where the government plays a strong coordination role among corporate and private actors. Government agencies such as Japan’s Ministry of International Trade and Industry (MITI) before the 1980s also fostered intense interaction between government and business. But no other large economy currently comes close to China in the pervasiveness of state intervention in the economy and society at large. State participation in its economy forms what Chinese scholars call a “state-permeated capitalism” or a “state-constituted market economy,” which creates a major impediment to grasping the full scale of China’s state support.

Countervailability: Taken as a whole, the systemic and pervasive nature of China’s market distortions is not itself countervailable under the SCM agreement. Furthermore, the sheer scale of China’s state support, which spans most sectors of its economy and impacts entire value chains, makes it challenging to address through CVD investigations. These investigations are product-specific and time-intensive, creating limits in effectively tackling the broader, systemic nature of China’s industrial policy.

Conclusion

China’s distortive industrial policies and practices are already affecting market outcomes in China and abroad. In China, they are creating a growing disconnect between supply and demand at the macro level, and intense competition and cutthroat price wars in a range of sectors at the micro level. Abroad, they have ballooned China’s global export shares in many sectors over the past decade, especially since the pandemic. The combination of weak domestic demand and expanding industrial capacity increased China’s manufacturing trade surplus by $775 billion between 2019 and 2023—more than Belgium’s entire GDP, or three times that of Greece. In 2024, China’s trade surplus reached a record high, approaching $1 trillion. Excess production capacity drove a surge in export volumes while pushing prices downward—with monthly year-on-year export quantity growth averaging 14%, significantly outpacing the 7% growth in export value.

The effect of these policies is most pronounced on advanced economies. The EU, the US, Japan, South Korea, and Taiwan collectively lost 2.7 percentage points of global export market share between 2019 and 2022, while China gained 2.8 percentage points. But China’s policies and practices are also affecting emerging markets in ways likely to prove deleterious to their long-term economic welfare, competitiveness, and security.

Despite this, Beijing is not changing course, but explicitly doubling down. The Party’s twice-a-decade Third Plenum held in July 2024 pledged to maintain the supply-side expansion of high-tech industries, export manufacturing, and other favored sectors. While the December 2024 Central Economic Work Conference signaled a shift in rhetoric—placing household consumption at the forefront and pledging fiscal stimulus and trade-in subsidy programs—there has been no fundamental change in China’s industrial policy. Crucially, there was no discussion of deeper reforms to China’s financial system, the core driver of the distortions and spillovers affecting global markets.

Fiscal constraints, particularly at the local government level, will ultimately put a cap on public spending and state support. As these financial pressures mount, though, the Chinese government might be compelled to rely instead on indirect and non-financial instruments such as legal preferences, strategic market closures, and local favoritism—measures that are even harder to counteract and regulate on the global stage.

With no sign of change from Beijing on the horizon, and worried about their own industries and workers, China’s largest trading partners are pushing back. Trade imbalances are not just a US-China irritant anymore: Canada, the EU, and emerging countries including India, Brazil, South Africa, and Turkey are launching trade defense cases to stave off what they see as injurious imports. Some countries may also feel the urge to imitate some of China’s practices to provide a buffer for domestic firms and workers and stay competitive in the longer run. Just as for China today, a headlong embrace of statism would be immiserating for many nations in the future, especially those with weaker institutions

Faced with heavily subsidized exports across a wide range of sectors and products, countries have only a limited set of options under the WTO to respond effectively. The SCM Agreement can offer some relief, and it can even adapt—to some extent—to China-specific distortions. For example certain private actors could be designated as state-directed, and out-of-country benchmarks could be used to assess distortions. However, the agreement has clear limitations. It only covers financial contributions, meaning it does not account for non-financial state control over the economy, which is a powerful subsidy-like distortion mechanism in China. Additionally, CVD investigations are product-specific and time-intensive, making them difficult to apply at scale when distortions span a wide range of sectors and entire value chains.

Other WTO agreements, such as the TRIMs Agreement, can also help tackle discriminatory market access practices. But their use has been effectively stalled due to the vacancy of the WTO Appellate Body since December 2019, blocking major avenues for legal recourse. Besides, some of the most significant market-distorting practices—such as politically motivated credit allocation and its state-led distribution—are not covered under any WTO agreement.

In these circumstances, countries around the world may seek to apply WTO subsidy and SCM rules more flexibly, while pushing to update rules that are too narrow to effectively address Chinese state support and market distortions. Actions outside the WTO framework are likely to increase as well, as many countries could invoke national security exemptions or other justifications to take unilateral measures aimed at protecting their domestic industries. Countries including the US, Japan, and the EU have already begun to take steps independently to counter these challenges, implementing measures such as enhanced trade defense mechanisms, investment screening processes, and strategic economic partnerships to safeguard their industries and maintain competitive parity. In addition, we may see a rise in mini-lateralism, with like-minded countries forming coalitions to establish alternative trade rules and enforcement mechanisms in parallel to existing WTO disciplines. These shifts put the future of global trade multilateralism at stake. The relevance of the WTO and its central role in the global trading system will ultimately depend on whether its members retain confidence in its ability to tackle the pressing challenges of today’s trade environment.

From the earliest moments of the Deepwater Horizon oil spill, NOAA has played a lead role in all the complex steps along the way. Learn the details of the work we’ve done over the past 10 years—responding to the spill, assessing the damage, developing a restoration plan, and implementing on-the-ground restoration projects—and how our work is continuing today.

The Oil Spill Begins

April 20, 2010 – An explosion on the Deepwater Horizon Macondo oil well drilling platform started the largest marine oil spill in U.S. history. For 87 days after the explosion, the well blasted oil and natural gas continuously and uncontrollably into the northern Gulf.

July 15, 2010 – After several unsuccessful attempts to contain the spill, a “capping stack” was installed that stopped the release of oil. Every day, for 87 days, the Macondo well had released an average of more than 1.5 million gallons of oil into the ocean. In all, an estimated 134 million gallons of oil was released.

Responding to the Crisis

April 20, 2010 – NOAA is the lead science agency for coastal oil spills, and our experts were on the scene from the earliest moments of the crisis. We brought decades of experience protecting and restoring our coasts from oil spills. We provided critical information to guide the emergency response, both on-scene and through our headquarters and regional offices.

2010 through 2015 – NOAA’s response to the spill, led by our Office of Response and Restoration, started within hours of the explosion. It continued for years, through the well capping, cleanup, and assessment. Our response was unprecedented, involving thousands of staff across the agency to meet the scale of the spill. We used satellite imagery and real-time data on tides and currents to predict and verify oil spill location and movement. To ensure the safety of fishermen and seafood, our scientists took water and seafood samples. In addition, our experts established a marine mammal and sea turtle group. We deployed NOAA technical experts for wildlife reconnaissance, response, and rescue of sea turtles and marine mammals.

Assessing the Damage

April 20, 2010 – As soon as news of the spill was received, NOAA and other agencies began working to assess how the oil and other contaminants were impacting natural resources. The Oil Pollution Act authorizes certain federal agencies, states, and tribes—collectively known as natural resource trustees—to conduct a natural resource damage assessment. This process focuses on evaluating the impacts of oil spills and other disasters, and planning and carrying out restoration efforts. Working together with the oil spill response efforts, teams of scientists rapidly mobilized. They evaluated the potential impacts of the spill on fish, wildlife, surrounding habitats, and public use of those resources.

April 26, 2011 – Federal and state agencies officially established the Deepwater Horizon Trustee Council. Since then, the Council has worked to restore the Gulf to the condition it would have been in if the spill had not happened.

2010 through 2015 – NOAA’s Damage Assessment, Remediation, and Restoration Program—in coordination with other NOAA offices and alongside other Trustees—led the effort to assess the impacts of the spill. Over the course of the assessment, experts used field studies, laboratory studies, scientific literature, and model-based approaches. They documented the quantity and location of oil, the ways in which the spill was affecting natural resources, and the type and amount of restoration required. This ecosystem-scale effort spanned thousands of square miles of ocean and shoreline. It included more than 20,000 trips to the field to collect data and more than 100,000 samples collected.

NOAA veterinarian Dr. Brian Stacy prepares to clean an oiled Kemp’s Ridley turtle.

Building a Comprehensive Restoration Plan

Early 2011 – With the findings from the assessment, NOAA and other Trustees began planning our restoration efforts. In early 2011, we began a scoping effort to identify issues of public concern. As part of the scoping process, the Trustees hosted public meetings across all the Gulf states. We wanted to identify concerns of the affected public, state and federal agencies, and tribes, and to involve the public in the decision-making process.

October 5, 2015 – The Trustees released a draft of their comprehensive, integrated, ecosystem restoration plan for the Gulf. This draft plan included a detailed assessment of impacts of the spill on natural resources in the Gulf and the services those resources provide. It also identified the types of restoration needed to compensate the public for these impacts.

October 5 to December 4, 2015 – The Trustees received public comment on the draft for 60 days. During that time, we hosted eight public meetings in Louisiana, Mississippi, Alabama, Florida, Texas, and Washington, D.C. We received more than 6,300 public comments—both written and verbal. The comments were reviewed by the Trustees and taken into consideration prior to finalizing the plan.

February 19, 2016 – The Trustees released the Deepwater Horizon Final Programmatic Damage Assessment and Restoration Plan. In addition to delineating a comprehensive approach to restoration, the plan also outlined the structure of how the Trustees would operate. It established Trustee Implementation Groups for seven restoration areas: each of the five Gulf states, Open Ocean, and Regionwide. The plan describes the process for each group to develop project-specific restoration plans for their respective area. It also outlined the responsibilities for individual Trustees as they implement and track the progress of their restoration work.

March 2016 – After a 30-day waiting period, the Trustees made a final decision to select the restoration alternative evaluated in the plan as our approach for restoration implementation. We entered a Record of Decision that explained our decision to pursue this approach.

An aerial view of a NOAA-led project to protect marsh habitat in Mississippi.

Reaching a Historic Settlement

July 6, 2012 – NOAA and other Trustees were leading the natural resource damage assessment process. Meanwhile, other civil and criminal actions were also underway to respond to environmental damages caused by the spill. This included the 2012 RESTORE Act. It established a fund that receives 80 percent of any Clean Water Act civil and administrative penalties paid by companies responsible for the spill. It also:

Created the RESTORE Council , composed of the five Gulf states and six federal agencies, including NOAA. Through the Council, NOAA received funding for three programs currently underway: the GulfCorps program with restoration teams in each of the Gulf states; the Connecting Coastal Waters initiative to restore more than 22,000 acres of habitat across the Gulf; and the Council’s Monitoring and Assessment Program , supporting the science-based decision-making and restoration evaluation.

Established the NOAA RESTORE Science Program , which funds research and monitoring in the Gulf. The program has already supported nearly $40 million in new research, and expects to invest another $6 million or more each year for the next two decades.

May 13, 2013 – The National Fish and Wildlife Foundation launched the Gulf Environmental Benefit Fund. This fund, established in 2013, arose from the criminal plea agreement with BP and Transocean. The Foundation directs the funds to restoration projects benefiting the natural resources that were impacted by the spill. NOAA assists by providing technical input and environmental compliance advice on projects proposed for funding. We also help ensure coordination among all the partners in Gulf restoration.

April 4, 2016 – BP, the United States, and the five Gulf states agreed to a settlement. It resolved claims for federal civil penalties and natural resource damages related to the Deepwater Horizon spill. The $20.8 billion settlement, which included up to $8.8 billion for natural resource damages, was the largest environmental damage settlement in United States history.

GulfCorps members work to build a living shoreline in Apalachicola, Florida.

Working Toward a Restored Gulf of America

April 21, 2011 – The Trustees announced an agreement under which BP would provide up to $1 billion toward implementation of early restoration projects. This early restoration agreement allowed for some restoration work to begin prior to reaching a settlement. It allowed for on-the-ground restoration to begin while Trustees continued with assessment and restoration planning.

2012 through 2015 – The Trustees negotiated and sought public review on a series of early restoration projects with BP. Several NOAA-led projects were approved, including:

Building protective living shorelines in Florida, Mississippi and Alabama .

Restoring beach, dune, and marsh habitats at Chenier Ronquille Barrier Island .

Improving our capacity to respond to stranded sea turtles , better understand ongoing threats, and engage with fishing communities to reduce harmful interactions with gear.

Engaging pelagic longline fishing communities to voluntarily take a break from fishing, or use alternative gear that reduces incidental bycatch to restore fish like tuna and swordfish.

2016 to Present – Since the settlement, NOAA has continued our early restoration projects and taken a significant lead in new projects. We are currently leading 35 natural resource damage assessment projects with budgets totaling $322 million. These projects benefit fish, sea turtles, marine mammals, mesophotic and deep benthic communities, oysters, gulf sturgeon, and coastal and offshore habitats.

September 28, 2016 – The Trustees held their first annual public meeting on Gulf restoration efforts. Trustees continue to host these public meetings each year to provide updates on work since the settlement. In addition to public meetings, the Trustees provide annual reporting on the progress of activities underway. These reports include information on planning, project implementation, and fund allocations and expenditures for each Trustee Implementation Group. NOAA and our partners will continue to hold public meetings and provide annual updates on our restoration progress and how we’re spending settlement funds.

April 2017 – Trustees received the first annual post-settlement payments from BP.

June 27, 2017 – The Regionwide Trustee Implementation Group released four strategic frameworks to assist with restoration planning. These frameworks provide broad context and guidance for the restoration of oysters, sea turtles, birds, and marine mammals across multiple restoration areas.

2017 and 2018 – The Trustee Implementation Groups finalized their first restoration plans, selecting projects to continue work started through the early restoration projects.

January 4, 2018 – The Trustees released the first version of their monitoring and adaptive management manual. The manual includes guidance for monitoring needed to evaluate restoration outcomes and benefits to injured resources. It will be revised periodically as needed based on developments in guidance, restoration approaches, and best practices.

September 2019 – The Regionwide Trustee Implementation Group asked the public to submit restoration project ideas to be considered in future proposals. The Trustees reviewed more than 5,000 project ideas. Once identified, they will represent the first regionwide set of projects for coastal and marine resources that range throughout the Gulf and Gulf states.

December 10, 2019 – The Open Ocean Trustee Implementation Group announced 18 projects totaling almost $226 million. The projects will help restore fish, sea turtles, marine mammals, and deep-sea coral habitat that were injured by the spill. They represent the largest dedication of Natural Resource Damage Assessment funds to restore oceanic marine resources in the Gulf to date.

Looking Ahead

NOAA’s work restoring the Gulf will continue past 2030. We will lead the implementation and monitoring of numerous large restoration projects, evaluate restoration effectiveness, and make corrective actions as needed. NOAA is using lessons from the Deepwater Horizon spill and subsequent research to be even better prepared to provide expert scientific support during other oil spills. These lessons, and our continued scientific support, will ensure restoration provides sustained benefits to natural resources and communities in the Gulf.

Financial speculators are investing in a growing number of lawsuits against governments over environmental laws and other regulations that affect profits, often generating lucrative awards, the Guardian has found.

For a long time, litigation finance thrived primarily in the realm of car crashes and employment claims. “Had an accident that wasn’t your fault?” was the industry’s billboard catchphrase, offering to finance lawsuits in exchange for a cut of any payout.

Now, however, the sector has found a far larger playground: financing massive arbitration lawsuits launched by companies against governments, where claims can stretch to tens of billions of dollars.

These cases come under a little-known area of international law called investor-state dispute settlement (ISDS), which allows corporations to sue countries for actions that hurt their profits.

Quick Guide What is ISDS and how does it work? Show What is it? Investor-state dispute settlement (ISDS) was created to help companies protect investments abroad. It allows companies to sue countries for lost profits caused by government action including corruption, seizure of assets or the introduction of health and environmental policies. The system was created in the 1960s by the World Bank. It was intended to give companies confidence to invest in poorer countries with weak political systems where they might not get a fair hearing in domestic courts. How does it work? The foreign company must put forward a case showing that the state has damaged its profits. Most international investment treaties and free-trade deals include ISDS clauses. Cases are heard by a private arbitration tribunal, and typically decided by a panel of three arbitrators – one chosen by the company, one chosen by the state and the third selected jointly. How much are the cases worth? Awards regularly amount to hundreds of millions of dollars, and some are in the billions. In 2024 the average amount awarded was $385m (£304m). The average sum awarded is increasing and these payouts can make up a sizeable chunk of poorer countries’ annual budgets. Who is involved? The fossil fuel and mining industries are the most litigious in the ISDS system, accounting for more than 30% of known cases. Most claims are brought by companies based in rich countries against the governments of developing countries. Companies registered in developed countries file 81% of ISDS lawsuits, according to UN data, while developing countries have faced 62% of cases. How common is it? ISDS began as an obscure legal mechanism, averaging about one case a year for its first decade. Now, dozens are brought every year, with Guardian analysis finding more than 900 since 2013. Was this helpful? Thank you for your feedback.

With litigation funders facing no risk of a counterclaim, and potential awards that now average more than $200m (£160m), legal experts warn that the system has become a “gambler’s nirvana” for hedge funds and specialist financiers.

View image in fullscreen Burford Capital, the world’s largest litigation-finance firm, says it provides access to justice by supporting plaintiffs who otherwise could not afford legal action. Photograph: M4OS/Alamy

Within the sector, the debate is growing: advocates for third-party funding say it increases access to justice but critics, including arbitrators who rule on cases, are raising concerns that the growth of third-party funding is fuelling expensive and potentially frivolous cases at enormous cost to the public.

A Guardian investigation, which analysed more than 1,400 cases launched against governments, found that ISDS cases have become far more common and lucrative. More than $120bn of public money was awarded to firms through ISDS courts, including at least $84bn to fossil fuel companies and $7.8bn awarded to mining companies.

The true figures are likely to be far higher as companies often do not disclose the size of payouts they receive. The Guardian found that in 31% of cases where a payout or settlement was made, the size of the award was not disclosed.

These cases have become an increasingly popular investment class for hedge funds and other investors, who back the legal action financially in exchange for a share of the final award. The Guardian identified at least 75 ISDS cases backed by third parties, although this too is likely to be a substantial underestimate: many treaties include no obligation to disclose third-party funding of cases, and the largest dispute-resolution body only began demanding disclosure in 2022.

Half of all third-party funded cases were launched by investors from the US, Britain or Canada, and more than 50% were cases relating to fossil fuels or mining. More than three-quarters of cases were against developing countries, according to Guardian analysis of data provided by Jus Mundi, a legal intelligence platform with access to the largest international law and arbitration database.

Q&A How did the Guardian analyse ISDS cases? Show The database created by the Guardian includes cases brought by companies against states (and, in a small number of cases, wholly state-owned enterprises) that are decided by international arbitration. These cases are governed by a range of dispute resolution systems and arbitration systems. For simplicity we refer to them as ISDS (investor-state dispute settlement) cases, which is the most commonly understood term for international arbitration between companies and countries. The Guardian analysed more than 1,400 cases, but these may only be a snapshot of the actual number of suits. Some cases are conducted entirely in secret, with no public record of their existence. Others do not disclose the way they were decided, or the size of the award. Was this helpful? Thank you for your feedback.

Examples of third-party funded cases include the Bermudan company South American Silver, whose subsidiary acquired mining concessions in an area of Bolivia mainly inhabited by Indigenous communities. In 2010, the company was accused of polluting sacred spaces and threatening community members, and the Bolivian government revoked the concessions. The government had to pay the mining company $18.7m in compensation.

View image in fullscreen The Malku Khota mine, one of the world’s largest reserves of silver, indium and gallium. South American Silver won millions in compensation after Bolivia revoked its concession in 2012. Photograph: TriMetals

In another case, the Mexican government is being sued by a Canadian mining company, Silver Bull, for $408m in damages after it failed to disband a blockade of local protesting miners. The case is expected to start in October.

This year, Burford Capital – the world’s largest litigation-finance company – is backing a case against Greenland for the impact of a uranium mining ban that a mining company argues in effect ended its development of one of the world’s largest rare earth mineral deposits. If Greenland loses the case, it faces either allowing the mining to go ahead or paying as much as $11.5bn in compensation.

Concerns are increasingly being raised by those who work within the ISDS system, including arbitrators who adjudicate cases.

Muthucumaraswamy Sornarajah, an international lawyer and ISDS arbitrator, believes third-party funding has made ISDS into “big business”. He said it was likely that there were more claims being brought, because the risk of losing the claim “vanishes” for the claimant: “So it would mean that the respondent states – most of which are developing countries – would have to face the cost of defending potentially frivolous claims that are brought with third-party funding.”

Sornarajah said the combination of ballooning legal fees and third-party funding meant “the extent of the business, or profits, that can be made as a result of ISDS is quite massive”.

Internationally, the litigation finance industry is booming, worth $17.5bn in 2024. Supporters of third-party funding typically argue that their participation makes the justice system more accessible.

Christopher Bogart, chief executive and co-founder of Burford Capital, the largest provider of litigation finance in the world, said third-party funding played an important role in providing access to justice by supporting litigants that otherwise would not be able to afford legal action. Burford Capital was the only third-party finance firm that would speak to the Guardian. The company said that as of September 2024, 93% of concluded cases generated a return for clients.

“Legal finance provides a vetting function and weeds out meritless cases: we only get paid when our clients win their cases – if the cases we fund lose, we lose 100% of our money,” the company said in a statement.

Bogart added: “I don’t think ISDS is any more high potential or lucrative than lots of other areas of litigation.”

View image in fullscreen The Kvanefjeld mine site near Narsaq. Greenland is being sued after it stopped Energy Transition Minerals mining rare-earth elements and uranium there. Photograph: Patrick Greenfield/Guardian

But critics warn that the rise of third-party cases is driving the growth of speculative cases. Lisa Sachs, director of the Columbia Center on Sustainable Investment, said: “Third-party funding enables, or even encourages, investors to pursue claims off investors’ balance sheets, removing a key deterrent to bringing weak or speculative claims.

“The litigation funders seek out and invest in cases as an opportunity to generate a return on their investments, at times partnering with law firms who have a financial interest in bringing more claims as well. This dynamic incentivises more arbitration, regardless of broader public interest or the legitimacy of the claims.”

However, Burford said: “We would go out of business if we chose bad or frivolous cases and business necessity requires us to be highly selective in our investments and to back winning cases. We enable businesses that wouldn’t otherwise be able to seek justice.”

Currently, arbitrators cannot financially penalise third-party funders by forcing them to cover a government’s legal costs. But some think that should change. Commenting on the case of Teinver v Argentina, one of the arbitrators, Kamal Hossain, said in a dissenting opinion that “the creation of a ‘gambler’s Nirvana’ by allowing third-party funders to use investor-state dispute settlements as a means of financial speculation, without any possibility of making costs awards against those funders, is deeply problematic.”

“The current inability of tribunals to make cost awards against third-party funders is a real and serious issue, and has attracted the concern of arbitrators in previous cases,” he said. “Their involvement may add to the costs of the proceedings. For that reason, as a matter of principle, a tribunal should be able to make a costs order against a third-party funder.”

View image in fullscreen The US-based Odyssey Marine Exploration won a payout of $37.1m from the Mexican state after it was denied a permit to mine the seabed on environmental grounds. Photograph: Reuters

In a recent dissenting opinion on the Odyssey Marine Exploration case against Mexico, Prof Philippe Sands, one of the arbitrators, highlighted the “jaw-dropping” costs that the claimant had racked up, which amounted to more than $21m, half of which was covered by third-party funding. The investors’ costs were about 10 times that of the government in defending the claim.

In a subsequent lecture, Sands raised the broader issue of third-party finance in the ISDS world, echoing concerns about how costly the system has become. “The arrangements may be said to assist in delivering a flowering of sorts: more fees for the lawyers, more cases for the arbitrators and a deeper, wider and more lucrative trough into which all of our snouts may be dipped,” he said.

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