Government subsidies have been used as a policy tool by many countries. Given the importance of government subsidies in the context of Chinese economy and state-owned enterprises (SOEs), this study seeks to understand the role played by government subsidies in the operating performance of Chinese SOEs. Using panel data on Chinese SOEs to construct the fixed-effects regression models, this study examines the effects of government subsidies and explores the moderating role of ownership structure in the correlation between government subsidies and operating performance of SOEs.

With the growing concern of the international community about the negative spillover effects of SOEs on trade, reaching a consensus among different stakeholders has become increasingly urgent. This paper argues that strengthening a redefined competition policy is a feasible alternative, or at least a complementary option to the existing trade framework.