China’s fair competition review system currently adopts a full-coverage mechanism, designed to prevent, at the source, all policy measures that may have the effect of eliminating or restricting competition. However, taking government subsidy policies as an example, practice shows that the proportion of cases that actually cause substantial harm to competition is extremely low. Such policies are mostly oriented towards addressing market failures and achieving social or political objectives, and their policy benefits often far outweigh their potential impact on competition. Against this backdrop, it is necessary to further explore whether China’s fair competition review system should subject all government subsidies to full-coverage review. From the perspective of institutional objectives, the core aim of fair competition review should be to ensure that the goals pursued by government actions can be achieved, and that the overall benefits brought about outweigh the resulting harm to competition. It is not meant to eliminate all competition distortions, and therefore it is unnecessary to cover every subsidy measure. From the perspective of institutional costs, the full-coverage review faces the dual constraints of scarce administrative resources and high error costs, and its marginal benefit in reducing false negative error costs is also very limited. Therefore, it is necessary to establish a scientific and reasonable block exemption mechanism, to identify by category those subsidy policies with low risk of harming competition and significant economic and social benefits, and to formulate clear exemption standards and quantitative thresholds to exclude qualifying subsidy policies from fair competition review. The construction of block exemption generally follows the principle of combining leniency with strictness. It must avoid falling into the Nirvana fallacy that “all review errors can be eliminated”, while also preventing overly lax exemption standards from rendering the fair competition review system ineffective. The scope of exemption specifically covers five categories: de minimis subsidies, regional investment subsidies, subsidies for small and medium-sized enterprises, R&D and innovation subsidies, and environmental protection subsidies. At the same time, to prevent abuse of the exemption system in practice, a supporting oversight mechanism should be established to ensure the effective implementation of the exemption rules and the realization of the objectives of fair competition review.