Aurelia Butler

Seven years after Beijing launched its Made in China 2025 plan to boost cutting-edge manufacturing in the country, the term has virtually disappeared from public discussions and official documents.But the policy itself has not died. It survives and thrives through government subsidies, which continue to be directed at favoured companies such as electric vehicle manufacturers and chipmakers even as pressures mount on local government finances across China.Made in China 2025 was originally revealed in May 2015 with great fanfare and an aim to transform the country “from a manufacturing giant to a world manufacturing power” by 2049, the centennial anniversary of the people’s republic.Governments around the world provide financial assistance to help tech sectors on their territories for various reasons. China is no exception, especially in its efforts to deliver this strategic policy linked to President Xi Jinping’s long-term target of creating “a modern and prosperous socialist state” by that year.The plan highlighted 10 key areas to bolster — from IT, robotics and new energy vehicles, through biotech and agricultural machinery, to aerospace, maritime and railway equipment — and promised to encourage innovation with a mixture of market-orientated approaches and government guidance.Beijing stopped using the term as the US waged its trade war against China under President Donald Trump. But a Nikkei Asia analysis of data compiled by Fitch Ratings shows that top recipients of government subsidies are mainly tech companies closely associated with Made in China 2025. The big exceptions are certain energy companies that have been heavily supported for different reasons, including energy security and price stability.

With no convenient data from the Chinese government available on state subsidies, Fitch gathered public disclosures of almost 5,000 mainland-listed companies on the receiving end.SAIC Motor, the country’s largest automaker by size, in 2021 received the largest amount of subsidies, Rmb4.03bn ($598mn), or 31 per cent more than the year before, taking the crown from China Petroleum & Chemical, or Sinopec, which had dominated for years.Three more automakers made the top 10 — BYD, Great Wall Motor and Anhui Jianghuai Automobile Group (JAC). Together, the auto industry subsidies indicate Beijing’s priority is to nurture homegrown new energy vehicle manufacturing amid the historic shift to electrification.BYD, which recently overtook Tesla as the world’s largest EV maker by vehicles sold, disclosed more than a dozen subsidy items in its latest annual report, including large sums from two “industrial development funds”, one each for automobiles and batteries.Great Wall Motor, a big SUV maker, saw its subsidies jump by 73 per cent from the previous year to almost four times the level of 2019. A large chunk came from a “government industrial policy support fund”. JAC, which mainly produces commercial vehicles, disclosed more than 20 subsidy items, the largest for a “construction project of [a] high-end electric light truck”. Government grants to JAC almost doubled over the past three years, exceeding the company’s aggregate net profits by more than 14 times.Not quite in the top 10, the world’s largest EV battery maker, Contemporary Amperex Technology (CATL), came in at number 11, its annual subsidy having ballooned 2.6 times to Rmb1.67bn over three years. Chongqing Changan Automobile and Guangzhou Automobile Group were also among the top 20 recipients.Chips and displays that are vital for a range of tech items are high up in the league standings as well. Semiconductor Manufacturing International Corporation (SMIC), China’s national chip champion, and BOE Technology, the leading display maker, have been regulars on the top 10 list, while 5G network providers China Mobile and China Telecom were ninth and 19th respectively in 2021.

A mainland-listed unit of Taiwan’s Foxconn was again a big beneficiary of Chinese state subsidies, a situation that in the past has raised political tensions in Foxconn’s home market.The funding is sprinkled to smaller companies, too. An examination of recipients with high ratios of government subsidies to revenue uncovers biotech drugmakers such as Shanghai Yizhong Pharmaceutical and Mabwell (Shanghai) Bioscience.Foreign governments continue to be concerned about the Made in China 2025 policy. The annual white paper by Japan’s Ministry of Economy, Trade and Industry (METI), published in late June, dedicated a section to China’s state subsidies and quantified the continued rise of payments to companies in the 10 core areas identified by the policy.

Growth accelerated after 2018, when the term was being vanished, it found. Total grants to Made in China 2025-linked companies reached about Rmb100bn in 2020, more than doubling from 2015.“The overall activities of Chinese companies as a whole have shifted toward these areas,” the report says. “The financial support to these sectors is getting generous.”The overall amount of government grants in 2021, according to Fitch’s tally, was Rmb217.92bn, or 3.2 per cent less than the year before. This marked the first year-on-year drop since 2009, but all experts contacted by Nikkei Asia believe there has been no change in Beijing’s policy to support tech companies, and the fall is seen as temporary and technical.The decline could be attributed to the method by which figures are gathered. The total amount is calculated by taking the sums of government subsidies recorded in each year’s profit and loss statement. There are lags where grants are awarded but sit only on the balance sheet until they are actually executed.There are cases emerging, however, where certain government subsidies are not delivered, stemming from fiscal constraints on local governments.CPT Technology Group, a Fujian-based LCD display manufacturer, partly blamed an increase in its first-half net loss on a drop in government grants.The Shenzhen-listed company was supposed to receive a total of Rmb2.64bn in grants from the Futian municipal government in six annual instalments of Rmb440mn after its latest LCD factory in the city went on stream in June 2017. However, the promise was fully met only in the first year. The amount was slashed to Rmb300mn for the following two years and cut again to Rmb100mn paid by last June. This year, it is down to zero.The Futian government issued a letter promising to fulfil its financial obligations, the company had said in 2020, but the city has admitted that it is under “financial stress”.

Employees work on a car assembly line at SAIC Motor. In 2021, the company overtook Sinopec as the largest recipient of government subsidies in China © Reuters

Visionox Technology, another Shenzhen-listed panel producer, has not received all the Rmb700mn grant that should have been paid in June 2020 by the administrator of the high-tech industrial development zone of Jingnan-Gu’an district in the northern province of Hebei.The subsidy was for a state of the art factory to produce active matrix organic light emitting diode (AMOLED) displays for smartphones. The administrator added another Rmb200mn in subsidies in December that year, but no more than Rmb400mn has been actually paid, according to the company’s disclosures.The company took a rare step in writing off more than Rmb20mn of government grants, meaning it has deemed those receivables to be virtually uncollectible. Similar to CPT, Visionox said its net loss was expected to double in the first half, with a Rmb133mn decrease in subsidies one of the main reasons.

SMIC, China’s national chip champion, is a regular recipient of subsidies © Aly Song/Reuters

These could be isolated cases, but further deterioration of local government fiscal conditions could possibly affect the amount of public monies to be diverted even to strategic tech companies. Shinichi Seki, a senior economist at the Japan Research Institute who specialises in the Chinese economy, said the “pace of growth of government subsidies would be subdued due to lack of funds by local governments”.Even though strategies are drawn up in Beijing, a substantial portion of actual payments are made at local level. The current real estate bust has taken away precious income that usually comes from sales of land use rights to developers, while strict adherence to Xi’s zero-Covid policy is requiring that scarce funds be spent on virus testing and other related procedures. Recent tax rebates designed to stimulate the economy have also been taking cash out of local coffers.Seki sees “lights and shades to be more clear and distinct” in coming years, meaning local governments will become more discriminating when they hand out subsidies.Zhang Hongyong, senior fellow at the Research Institute of Economy, Trade and Industry in Japan, also foresees changes in the way subsidies are allocated by local governments, given the chronic cash shortage.“The certification of tech companies would be selective, and there would no longer be a lavish handout style,” he said. Subsidies could be tied to the level of research and development spending, he said.Beijing seems to be alive to the impact of a weakening fiscal position. In mid June, the State Council instructed local governments to keep their spending priorities straight, even under current financial constraints, stressing there are places to be “appropriately strengthened”. Along with education, medical insurance and infrastructure building, “research and development of science and technology” was mentioned, hinting that corporate subsidies to tech companies will have to go on.A version of this article was first published by Nikkei Asia on July 22. ©2022 Nikkei Inc. All rights reserved.Recommended storiesUS Senate moves ahead with $52bn CHIPS ActUS-China tech war: Beijing’s secret chipmaking championsChina’s hefty tax rebates batter COVID-hit local governmentsChina closes in on Japan’s hydrogen technology patent lead More

Sergio Massa appointed Eduardo Setti, an economist with experience in capital markets, to be finance secretary, while the experienced Daniel Marx will be part of the public debt monitoring team. Raul Rigo will be the treasury secretary.The decision comes days after Massa was appointed to lead the new ministry, which oversees economic, manufacturing and agricultural policy. The government formed it with the aim of fighting high inflation, a paralyzing fiscal deficit and a currency at historic lows against the dollar.”Their objective is to strengthen reserves, ensure treasury financing and promote the development of a national capital market,” Massa said on Twitter (NYSE:TWTR).Massa is set to announce other members of his team, such as the deputy minister or the secretaries of Agriculture and Energy, later on Monday.Local media said Massa will travel to the United States and France at the end of August to meet with authorities from the International Monetary Fund and the Club of Paris. Argentina has a $44 billion debt with the Fund and is renegotiating $2 billion in outstanding debt with the Club of Paris, an informal group of creditor countries that looks for ways of repayment for countries struggling with financial obligations.Massa is expected to resign as the head of Congress’s lower house Tuesday before being sworn in to his new position Wednesday, when he will hold a press conference to give more detail about his plans for the role.Argentina’s Merval stock index fell 4% to 117,586.78 points after gaining almost 8% last week.With the cabinet reshuffle, the government, whose approval rating is plummeting, hopes to quell social unrest over high prices and avoid further deterioration before the 2023 presidential elections. More

Good morning. Nancy Pelosi, Speaker of the US House of Representatives, is set to meet Taiwan’s president Tsai Ing-wen on Wednesday in a controversial visit that has triggered concern about a possible military response from China. Three people familiar with the situation said Pelosi would meet Tsai in Taipei as part of a wider visit to Asia this week. Pelosi did not include Taiwan on her official itinerary because of security concerns, but the FT’s Demetri Sevastopulo and Kathrin Hille report that Pelosi would be the first Speaker to visit Taiwan in 25 years. President Joe Biden dispatched senior officials, including national security adviser Jake Sullivan, to lay out the risks to Pelosi, but people familiar with the situation said she had decided to press ahead with the trip.What could be the potential repercussions be? China has issued strong warnings to the Biden administration suggesting that the People’s Liberation Army could take action if the 82-year-old Democrat went ahead with her planned visit.The US military has been preparing to protect Pelosi, who is flying on a US Air Force aircraft. Few experts believe China would try to shoot down her aircraft, but Chinese fighter jets could attempt to intercept her plane. This could trigger a dangerous situation because the US military would be compelled to intervene to protect Pelosi and her delegation.Opinion: The risks of Pelosi’s visit should not be underestimated, writes our editorial board.Do you think Nancy Pelosi should visit Taiwan? Email me at [email protected] or hit reply on this email and tell me what you think and I may feature your response in a future edition of FirstFT. Here’s the rest of today’s news — EmilyFive more stories in the news1. Hong Kong falls into second recession in 3 years Official data released yesterday showed that the city’s gross domestic product contracted 1.4 per cent in the second quarter of 2022, after a 3.9 per cent decline in the first three months. Tough Covid-19 restrictions continue to batter the Chinese territory’s reputation as an international financial centre.2. Grain exports depart Odesa A grain shipment has left the port of Odesa for the first time in months, in a crucial test of a deal between Russia and Ukraine intended to alleviate soaring global food prices.3. Alibaba will ‘strive’ to keep New York listing The Chinese tech group said today it would “strive” to keep the company’s New York listing after the US Securities and Exchange Commission said on Friday it would ban the company if it did not provide access to certain audit files. The SEC statement triggered an 11 per cent fall in Alibaba’s New York-listed shares. Alibaba shares in Hong Kong fell 3 per cent today.4. HSBC pledges to restore dividend to pre-pandemic levels Europe’s biggest bank promised to restore its dividend to pre-coronavirus pandemic levels “as soon as possible” as it pushed back against its largest shareholder, which is pushing for the bank to split its Asian and non-Asian operations. 5. Heineken warns of higher prices to come driven by soaring costs The drinks company has warned that the price of a pint will continue to rise over the next year as the Dutch brewer expects to pass on higher costs to consumers. Heineken, which beat revenue and profit estimates in the first six months of the year, said it was selling more beers than before the pandemic as consumers across Europe shrugged off rising prices.The day aheadReserve Bank of Australia meeting The central bank will hold its monthly rate-setting meeting. Policymakers are expected to hike interest rates by a half-point for the third consecutive meeting. (Reuters) Ukrainian grain shipment due to arrive in Turkey The Sierra Leone-flagged Razoni carrying 26,000 tonnes of Ukrainian corn is due to arrive in Istanbul today, according to a statement by the Joint Co-ordination Centre, established in line with the UN-led grain agreement.Earnings Companies reporting results today include Airbnb, JetBlue Airways, Man Group, Mitsubishi, Starbucks and Uber. What else we’re readingLife under the Taliban: ‘what matters is that we’re hungry’ The economic collapse since the group of Islamists retook power a year ago has left many Afghans struggling to make ends meet. For Nurzia Rashid and her husband Rahatullah Qalandari, anxiety about Afghanistan’s Taliban regime is overshadowed by more immediate concerns: where to find the next meal for their six children.England victory heralds commercial breakthrough for women’s game When an event provokes a public response from the Queen, the prime minister and the Spice Girls, questions about relevance are quickly dispelled. While the main challenges for the game remain much as they were: generating commercial income, attracting spectators, and giving more women and girls the opportunity to play — there are reasons to be hopeful.Chipmakers battle for slice of US government support Congress has agreed to make Chips Act grants available to foreign companies, but domestic chipmakers are lobbying hard to make sure the lion’s share of the money goes to American companies. TSMC, which is building a $12bn fab in Arizona, and Samsung, which is working on a $17bn facility in Texas, are staying in the fight.Venture capital’s silent crash Investors of all stripes have crashed the clubby VC world, drawn by the potential of technology start-ups. But there are signs the party is over. But unlike the stock market, there are no daily market indices to broadcast the pain, and no individual share prices for anxious tech employees to watch as their personal wealth evaporates.Generation Z: how to recruit and retain them The old rules have gone as graduates expect a conversation rather than an interview and want jobs with a wider purpose. Jonathan Black, head of the careers service at the University of Oxford, reports on how employers are having to change their recruitment practices.ChessA record budget and a nation’s grandiose sporting ambition are the driving forces behind the 180-nation Olympiad in Chennai, which approaches its closing rounds this weekend. The state of Tamil Nadu and its chief minister, MK Stalin, originally approved a $10mn budget, which has since overrun by more than a third. More

Registration is required under rules released in late November 2020 and will give authorities broad powers to compel platforms to disclose data of certain users, and take down content deemed unlawful or that “disturbs public order” within four hours if urgent and 24 hours if not.Several tech companies had rushed to register in days leading up to the deadline, which had been extended until Friday, including Alphabet (NASDAQ:GOOGL) Inc’s, Meta Platforms Inc’s Facebook (NASDAQ:META), Instagram and WhatsApp and Amazon.com Inc (NASDAQ:AMZN).Semuel Abrijani Pangerapan, a senior official at Indonesia’s Communications Ministry, said in a text message websites that have been blocked include Yahoo, PayPal and gaming sites like Steam, Dota2, Counter-Strike and EpicGames, among others.PayPal, Yahoo’s parent private equity firm Apollo Global Management (NYSE:APO) and U.S. game developer Valve Corporation, which runs Steam, Dota and Counter-Strike, did not immediately respond to requests for comment. EpicGames could not be reached for comment.Hashtags like “BlokirKominfo” (block Communication Ministry), Epic Games and PayPal trended on Indonesian Twitter (NYSE:TWTR), with many writing messages criticising the government’s move as hurting Indonesia’s online gaming industry and freelance workers who use PayPal.Pangerapan said the government will find a solution for people to withdraw their deposits from PayPal, which may include reopening access to its website for a short period, he told Metro TV.Authorities would unblock the websites if they comply with registration rules, he said, defending the measure as protection for Indonesian internet users.With an estimated 191 million internet users and a young, social-media savvy population, the Southeast Asian nation is a significant market for a host of tech platforms. More