Argument for Gov. Subsidy

For

1. Firstly, the subsidy can support the growth of China-made High-tech industry, thus helping domestic producers to broke the monopoly and be able to compete internationally. For instance, 97% of global AMOLED screen production capacity is monopolized by Samsung. However this may result in three problem: Ⅰ. Inefficient supply. Ⅱ. High price. Ⅲ. Samsung can do whatever it wants. So, the exist of domestic competitive suppliers is needed.

1. Then the subsidy will reduce the cost of capital investment projects which might help to stimulate economic growth by increasing long-run aggregate supply. To be more specific, the production and development of screens belongs to high-tech industry; thus, there must be a great deal of money spent on the investment; therefore, subsidy can provide companies with a great amount of capital for the technological researches. In the long run, the sales of advanced domestic screens will contribute to the economic development of the country. For example, in October 2016, BOE got the certification of Apple company and entered the supply chains of Apple to supply screens for MacBook Air due to the improving quality of BOE screen and thus will contribute to the GDP of China.

1. The subsidy also serves to lower the price of essential goods so as to make them more affordable. That is to say, to keep price down and make screens much cheaper to the digital device manufacturers, leading the digital devices to be more affordable for the public. The example can be a good demonstration of that---People would spend a lot on Samsung’s AMOLED screen. By contrast, the domestic AMOLED screen only costs consumers less money.

1. The last but not the least, subsidy can also guarantee the supply of the screens technology that is vital for the whole Chinese digital device industry such as smartphones, laptops, etc. More specifically, HTC, the phones supplier from Taiwan Province owned a phone product named HTC Desire G7 which used Samsung’s AMOLED screen technology, hitting the crowd in 2010. It could have been in great demand, but HTC itself couldn’t satisfy the huge demand due to Samsung’s intentionally stopping supplying that screen. Consequently, this brought great losses to HTC. As Samsung and HTC were the two powerful competitors at that time, the insufficient production capacity of HTC products led to even higher sales of Samsung’s smartphones. Hence, HTC recessed gradually while Samsung rose in status. This stresses the significance of the enough domestic supply which can be better implemented by issuing subsidy.