Industrial subsidies hit USD 108 billion and reshape global competition

Industrial subsidies are now a central instrument of economic strategy, helping shape which firms scale, which technologies dominate, and how global supply chains evolve. In 2024, subsidies reached USD 108 billion, accounting for 1.3% of firms’ sales revenue across 15 key industrial sectors.

This is not a cyclical rebound. Rather, it marks a renewed appetite for industrial policy among governments, who are deploying subsidies to secure supply chains, accelerate the energy transition and anchor domestic production.

New OECD analysis shows that industrial subsidies are rapidly increasing, reshaping global competition and supply chains, and raising concerns about efficiency and market distortions.  The 2009 peak resulted from collapsing revenues that mechanically increased subsidy intensity. Current levels are this time around more policy-driven, reflecting deliberate choices that are reshaping how global markets operate.

Subsidies are concentrated in sectors that determine long-term economic and technological leadership. Renewable energy equipment, semiconductors, and heavy industries receive the highest support relative to revenue, including solar photovoltaic panels, chip manufacturing, steel, aluminium, and shipbuilding.

These sectors share certain economic characteristics. They require scale, high upfront capital, and sustained investment in a context of growing concerns about the environment. Public support accelerates capacity expansion, rapidly increasing global production and reshaping supply dynamics.

The scale and structure of support differs sharply across economies. Between 2005 and 2024, Chinese firms received on average three to eight times more subsidies than competitors in OECD economies.

Differences in subsidy levels reflect fundamentally different policy models. China relies heavily on below-market borrowings through state-linked financial institutions, lowering financing costs and enabling rapid expansion. Europe prioritises grants, while Japan, Korea, and the United States rely more on tax concessions.

 Subsidies are shaping competition in global markets. Around 22% of global market share gains by expanding firms over the past two decades can be attributed to subsidies, rising to 60% for Chinese firms. Public support is now a core driver of competitive outcomes in global markets.

State ownership strengthens the impact of subsidy ecosystems. Firms with more than 25% government ownership receive higher levels of support than private competitors and are typically concentrated in capital-intensive industries.

Their proximity to public institutions facilitates access to funding and aligns corporate decisions with policy priorities. This integration allows governments to influence investment, production, and capacity expansion directly, reinforcing the impact of subsidies across entire sectors and value chains.

Subsidies increase market share but do not improve efficiency. Firms receiving higher levels of support do not show consistent gains in productivity or profitability.

This is a fundamental disconnect: subsidies are reshaping who produces and how much, but not how efficiently. Growth driven by public support weakens the link between performance and success, with implications for long-term competitiveness and innovation.

It also raises a key allocation issue, as capital is directed by policy rather than performance, increasing the risk of inefficiencies and excess capacity.

The true scale of subsidies remains difficult to assess. Many measures are not fully disclosed, particularly at subnational level, leaving significant gaps in global trade analysis.

This lack of transparency limits accountability and weakens policymaking. It reduces the ability to assess whether support is targeted, proportionate or distortive, and undermines international co-ordination at a time when subsidy use is expanding rapidly.

Better visibility at firm-level is essential to understand how support shapes competition and to enable more effective policy responses. The OECD Manufacturing Groups and Industrial Corporations (MAGIC) database helps close this gap by tracking subsidies actually received by firms, rather than relying on government disclosures. Its firm-level approach captures support across regions and levels of government, including where reporting is limited, and provides clearer evidence of how subsidies shape competition and market outcomes.

This improved visibility is critical to informing better policy design and addressing the risks associated with large-scale subsidy use.

Governments are pursuing what may be legitimate objectives. Subsidies can be used to secure supply chains, accelerate clean energy deployment, and protect strategic industries that underpin economic resilience.

Yet the scale and persistence of subsidies creates systemic risks. They can distort competition, artificially shift market share, and encourage excess capacity that spills across borders. The challenge is no longer whether to use subsidies, but how to contain their distortive effects.

Industrial subsidies are now firmly embedded in the structure of the global economy and decisively shape production and competition. They influence global trade discussions, including at the OECD Ministerial Council Meeting under the theme “Getting Industrial Policies Right for Open Markets, Growth and Prosperity”.

Strengthening transparency and international co-operation will be critical to ensure subsidies support policy goals without undermining fair competition and healthy, shared economic growth.

For more information on OECD work on industrial subsidies, visit: 

https://www.oecd.org/en/topics/sub-issues/industrial-subsidies.html