The lack of freer markets is itself a response to the biggest subsidy the Chinese government provides its manufacturers, the currency controls.
RMB is undervalued by ~10-30%, with latter being extreme estimates, pegged to usd with small floating band. It's minor advantage vs executing competent industrial policy that durably drives production costs down fraction vs competitors. Add 10-30% to PRC EV production costs and western (especially US) producers still nowhere near.
That’s _just_ the peg. The other currency controls include the prevention of currency outflows by Chinese capital and the restriction on foreign holders of Chinese debt. All of that drives the costs down.
My personal opinion is that the Chinese EV would dominate in a completely free market, but we will never know.
My broader point is that it’s weird to say that the cash subsidies make up for the lack of freer markets capital, that’s double dipping.
Currency controls drive costs down (really loss/inefficiency) in the sense that it contains misallocation like illicit capital flight, i.e. stashing grafted funds meant for industrial programs abroad. That's less advantage than mitigating the disadvantage of legacy of PRC corruption - not double dipping, but ensuring sauce stays in the domestic bowl to be dipped at all. And ultimately "freely" competing with reserve USD privilege is a stacked game - the currency controls themselves aren't subsidies, they protect employment of subsidies, i.e. ensuring higher % of X gets directed properly to industry, rather than mansions in vancouver, it's not a multiplier like X*2.
If the argument is that currency controls gives PRC a more stable basis for financing industrial policy (deal with fluctuations and keep domestic captive bond buyers), then sure, but that layer is levelling the playing field. Ultimately it comes to productively using actual allocated $$$ for indy programs to develop durable competitive advantages that can be sustained in lieu of subsidies. VS printing more billions to bail out legacy auto as domestic job programs - which op was replying to, everyone protects domestic auto, even PRC also has to prop up some SEOs, but they also focus on indy programs that's just about hammering pure industrial competitiveness to eventually build comparable item for fraction of the cost.
IMO why this proposal is exciting. If US producer can figure out how to produce somethign that's only 50% more expensive then PRC versus 200%, then it's a huge win.