A recent report by the Organization for Economic Cooperation and Development (OECD) indicates that global industrial subsidies have reached their highest level since the financial crisis. The surge in subsidies is not occurring in response to an economic crisis, but continues to expand amid a relatively stable global economy. This suggests that subsidies are no longer confined to their conventional function as short-term growth stimuli, but have become central instruments in the strategic contest among nations for technological, industrial, and supply-chain dominance, signaling the onset of a new phase in global competition.
Da-Nien Liu, Director of the Regional Development Study Center at the Chung-Hua Institution for Economic Research (CIER), believes there is a rationale behind this subsidy race. The pandemic, geopolitical conflicts, and supply chain restructuring have prompted nations to place greater emphasis on economic security so as to reduce foreign reliance and build self-sufficient production capacity through policy support. Moreover, the rollout of new industrial policies by major economies such as the U.S., the European Union, mainland China, and Japan has forced other nations to follow suit to prevent the flight of corporations, technology, and investment.
This signifies a fundamental shift in the logic of global market competition. Director Liu explained that while companies historically relied on technological innovation, cost control, and product quality to gain a competitive edge, government subsidies have increasingly become a decisive factor in determining market winners. When state support becomes a critical condition for corporate competitiveness, market rivalry may transition from competing on products and efficiency to competing on subsidies and policies, thereby amplifying the government’s role in the market.
If subsidies do not have a long-term exit strategy, they can lead to overcapacity, price distortion, and poor resource allocation, ultimately decreasing overall economic efficiency. These subsidies may also encourage the firms that benefit from them to compete in international markets by offering artificially low prices, which forces importing countries to adopt trade countermeasures such as anti-dumping and countervailing duties. Indeed, the recent escalation in global trade frictions is closely linked to the export of excess capacity fueled by subsidies.
More notably, international rules have fallen far behind policy developments. Current World Trade Organization (WTO) regulations on subsidies were established three decades ago, and their core framework remains unchanged.
Director Liu stated that the rapid rise of cross-border subsidies, state capitalism, and novel industrial policies—coupled with insufficient subsidy disclosure and the difficulty of providing evidence—has made it increasingly difficult for the existing system to effectively address new challenges. The European Union’s recent introduction of the Foreign Subsidies Regulation reflects how countries are beginning to seek new governance models to compensate for the shortcomings of current frameworks.
For Taiwan, the true challenge lies not in the subsidy amount but in policy choices. Constrained by fiscal resources and market scale, Taiwan cannot match the subsidy volume of major economies. Yet, its leading sectors—such as semiconductors, information and communications technology, and electronics—are exactly the targets for which other nations are aggressively competing. If countries continue to offer policy incentives to lure companies overseas, Taiwan will inevitably face mounting pressure from the exodus of talent, technology, and supply chains. Conversely, relying entirely on market mechanisms could erode corporate international competitiveness. Therefore, establishing a more precise and efficient industrial support system with limited resources will be crucial for Taiwan as it navigates the intensifying global subsidy race.
Director Liu argues that Taiwan’s focus should not be on subsidizing more, but on subsidizing with greater precision and efficiency. The government should concentrate its limited resources on areas with positive spillover effects, such as pioneering technologies, critical materials, talent cultivation, and supply chain resilience. Support should pivot from subsidizing individual companies to investing in public goods, including R&D platforms, testing and certification, human capital, and energy infrastructure. Taiwan must also continue to strengthen its trade remedy systems and its capacity to monitor foreign subsidies to ensure a level playing field.
The global subsidy race will not end anytime soon, but what merits true attention is not just the expanding scale of subsidies, but the changing rules of market competition. As corporate rivalry gradually morphs into a contest of government policies and institutional capabilities, future competitiveness will be determined not only by the companies themselves but also by the quality and governance capacity of a nation’s industrial policy.
Therefore, for Taiwan, the real competition is not over subsidy amounts, but how to build the most efficient industrial support system with limited resources to allow the government to enable competitiveness. Only by doing so can Taiwan sustain its competitive edge in the next wave of global industrial realignment and institutional reshaping.
Source: Da-Nien Liu (July 17, 2026). Taiwan’s Choices Amid the Subsidy Race. Economic Daily News. [https://money.udn.com/money/story/5629/9632925](https://money.udn.com/money/story/5629/9632925)