To implement financial support for innovation, the “Catalogue of Encouraged Imported Technologies and Products” was introduced in 2007, offering interest subsidies to domestic enterprises that import specific technologies through general trade channels. This policy combines trade promotion with financial support, reflecting China’s distinctive approach to diversified import strategies. This paper explores how these subsidies foster an environment conducive to innovation, enabling enterprises to adopt and integrate advanced technologies.

Drawing on the data from Chinese industrial enterprises, customs records, and patent filings from 2002 to 2013, this paper employs a DID approach to compare innovation outcomes between enterprises importing “catalogue products” and those importing “quasi-catalogue products”. The findings reveal substantially higher patent output among catalogue enterprises following the policy implementation. The results remain robust across various tests, including PSM, instrumental variable analysis, and placebo checks. Mechanism testing identifies three channels through which import interest subsidies drive innovation: relaxation of financing constraints, reduction in operational costs, and enhanced synergy between catalogue products and other inputs. Furthermore, heterogeneity analysis indicates a stronger innovation effect for enterprises with specific patent types, import enterprises in central regions, and large-scale enterprises.

This paper makes the following contributions: It clarifies how import interest subsidies promote innovation through financing constraints, validates the effectiveness of the policy, provides a novel framework for identifying policy causality, and explores the heterogeneity effects on different products and enterprises.