From Subsidy Competition to Institutional Enablement: A Fiscal and Tax Policy Framework for China’s Low-Altitude Economy

Abstract

China’s low-altitude economy includes unmanned aircraft, electric vertical take-off and landing aircraft, general aviation, digital airspace services and downstream applications. Due to the quick development of the area, the government has provided subsidies and industrial park construction. Only fiscal and tax policies that do not promote subsidy dependency, duplicate infrastructure or fragment regions are considered in this paper. Based on a structured synthesis of recent Chinese fiscal-policy research, foreign studies of innovation incentives, and official industry data, a market-failure and industry-life-cycle framework has been constructed. The four policy mismatches identified are: too much supply-side support, weak demand creation, poor accessibility of tax incentives for young enterprises, and fragmented fiscal governance of cross-jurisdictional airspace. A stage-contingent policy architecture is proposed. Early-stage support should focus on shared digital and physical infrastructure, competitive grants, public procurement and risk-sharing finance; the policy at the expansion stage can be more neutral tax instruments, interoperable standards and cross-regional cost sharing; mature activities will have reduced subsidies and performance-based user fees. Therefore, policy design should aim to build institutions that reduce coordination costs, uncover demand and protect competition, rather than naming specific enterprises.