SANTODOMINGO – Possible changes in China's industrial subsidy policy are beginning to generate concern in productive sectors of the Dominican Republic, particularly in the construction sector, where a significant portion of materials and supplies come directly or indirectly from that Asian country.
The president of the National Association of Companies and Industries of Herrera (ANEIH), Angelo Viro, warned from the company's official account that the elimination of subsidies to Chinese manufacturers could cause increases in the prices of some materials used in infrastructure and building projects in the country.
He explained that the Chinese government notified manufacturers that it will withdraw some of the subsidies that have supported industrial production for years, a decision that will begin to be reflected in the international market in the coming months.
“In January, the Chinese government notified all manufacturers that it would be removing the subsidies they had been receiving. This means that we could see price increases on some products starting in April,” Viro said.
For economies like the Dominican Republic, which depend heavily on imported inputs for construction, these changes could impact the costs of real estate projects, public works, and tourism developments.
An industrial system based on subsidies
For decades, China has built one of the world's most competitive manufacturing systems thanks, in part, to a wide network of state subsidies ranging from direct aid to tax benefits, preferential financing, and regulatory facilities for industrial companies.
According to a recent report by the International Monetary Fund (IMF), these incentives represent about 4% of China's gross domestic product (GDP), a significantly higher level than that of other major economies.
The international organization has recommended that Beijing cut these industrial subsidies by almost half as part of a structural reform aimed at improving economic efficiency, reducing market distortions and easing trade tensions with other countries.
According to the IMF, prolonged subsidies can lead to a misallocation of resources, stimulate industrial overproduction, and force companies to rely excessively on exports to sell their products.
Furthermore, this policy has caused concern among several of China's trading partners, who believe that state incentives allow Chinese companies to export goods at artificially low prices.
Adjustments to Chinese economic policy
The debate over industrial subsidies comes at a time when the Chinese economy faces major structural challenges, including weakening domestic consumption and trade tensions with the United States and other developed economies.
According to The New York Times, the Chinese government has implemented stimulus programs in recent years to encourage consumer spending, including a consumer goods exchange plan funded with approximately $42 billion.
The program allowed citizens to receive discounts when exchanging household appliances, electronic devices, and other products for new models, with the aim of stimulating domestic demand in a context of economic slowdown.
However, some cities have recently begun to reduce or suspend these incentives to prevent funds from running out prematurely, reflecting the difficulties the country faces in balancing its economic model.
For years, China's growth was driven primarily by infrastructure investment and the expansion of the real estate sector, but the weakening of the latter has forced the government to rethink its development strategy.
Economists point out that the transition to a domestic consumption-based model could involve adjustments in industrial policy, including a gradual reduction of the subsidies that have characterized the country's manufacturing system.
Potential effects on international markets
Changes in China's industrial incentive structure have global implications due to the country's weight in international supply chains.
China is currently the world's largest exporter of a wide range of industrial products, including steel, aluminum, electrical equipment, machinery, and materials used in construction.
If the reduction of subsidies leads to an increase in production costs, manufacturers are likely to pass on some of that increase to international prices.
For importing countries like the Dominican Republic, this could translate into an increase in the price of materials used in infrastructure projects, residential buildings, and tourist developments.
In the Dominican case, the construction sector represents one of the pillars of economic growth, with a key role in job creation and the expansion of the real estate market.
An increase in the cost of supplies could put pressure on public and private works budgets, as well as affect the final price of homes and real estate projects.
A scenario still evolving
Although the exact scope of adjustments to China's subsidy policy is still unclear, analysts agree that any significant changes to the country's industrial system will have repercussions for international trade.
The decisions Beijing makes in the coming months will be closely linked to its strategy to rebalance the economy, strengthen domestic consumption, and reduce trade tensions with other powers.
Meanwhile, productive sectors in economies dependent on industrial imports, such as the Dominican Republic, remain attentive to possible variations in the costs of raw materials and manufactured products.
For the construction sector, these changes could represent a new source of pressure in a global context marked by the volatility of input prices and transformations in supply chains.
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