> China cannot subsidize industries out of thin air
Correct. Their industrial subsidies come at the expense of China's domestic spending ability. Many pundits, including the one I linked, believe that China must allow increased domestic demand but this is politically unfavorable in China due to the entrenched interests and beliefs in the necessity of a strong industrial base.
How is this different than saying every investment is a subsidy? China's future domestic spending capability is obviously expanding as it invests in industrial capability.
Thanks to compounding, if they have consistently spent half as much as "they should" elsewhere for decades, there is some moment where they will reach more absolute domestic spending without ever raising that rate to where it "should" be.
I don't know, if you're interested I'd read more from the guy I pointed out above.
Off the top of my head, I'll say that China is making a trade-off to subsidize manufacturing at the expense of wages. This can take the form of 'malinvestment' or misallocation of capital(see the ghost cities, trains to nowhere, "Belt and Road" malinvestment, etc) which boost manufacturing in the short term while leaving little benefits in the long term. It also leaves China with weak domestic consumption so more of the GDP growth must be derived from manufacturing in order to meet CCP growth targets.
Further, the subsidies come at the expense of efficiency. For instance, China leads the world in cotton subsidies despite having 4x competing countries' costs to grow cotton. These subsidies do not necessarily translate into some future benefit for Chinese citizens.
Correct. Their industrial subsidies come at the expense of China's domestic spending ability. Many pundits, including the one I linked, believe that China must allow increased domestic demand but this is politically unfavorable in China due to the entrenched interests and beliefs in the necessity of a strong industrial base.