Published on: 2026-07-18
Source: People’s Republic of China — Translation
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Geneva, July 18 /Xinhua/ — Some international research institutes apparently mistakenly classify funding from Chinese commercial banks as subsidies, mainly due to the use of criteria that do not correspond to market realities, leading to misleading conclusions. This is stated in an article recently published on the World Economic Forum /WEF/ website.
The authors of the article are Yan He, secretary general of the China Society of Contemporary Finance, and three other experts. It notes that in recently published reports on industrial policy by international organizations such as the Organisation for Economic Co-operation and Development (OECD), it is claimed that Chinese commercial banks provide Chinese enterprises with large-scale financing at “below-market” rates. This fact is cited as evidence of large-scale industrial subsidies in China.
However, the authors argue that these studies often choose “market criteria” that do not reflect the real conditions of China’s financial system functioning and commercial lending practices, and corporate loans attracted at rates below these artificial criteria are considered subsidized.
For example, as noted in the article, equating China’s benchmark loan prime rate (LPR) for top-tier borrowers with a risk-free criterion leads to the erroneous assumption that any loan rate below the LPR is below market. In reality, the LPR serves only as a reference rate for loan pricing, and commercial banks apply differentiated pricing by adjusting spreads based on the specific characteristics of the borrower. A loan rate below the LPR is more likely to reflect a low credit risk of the borrower or high collateral quality, rather than the existence of a preferential regime.
The authors also note that applying the OECD calculation method to a sample of U.S. corporate bond issuers yields similar results, indicating widespread “below-market” financing, which further confirms that the choice of criterion significantly distorts the conclusion about whether the financing is subsidized.
As a result of constructing a more comparable market criterion that takes into account the characteristics of the financial markets and the corporate sector of China, the article established that the average cost of financing for the enterprises included in the sample, on the contrary, exceeds the market criterion by 0.2 percentage points.
Moreover, as the authors note, the profitability of the largest Chinese commercial banks corresponds to the indicators of leading banks in the USA, Europe, and Japan, and in some cases even exceeds them, which indicates the absence of any systemic concessions in terms of profitability in order to provide financing at “below market” rates.
The authors of the article concluded that the use of more substantiated market-based criteria is crucial for improving the accuracy, reliability, and objectivity of international subsidy assessments.
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