Thousands of Australian manufacturing jobs are at risk as China spends billions of dollars subsidising its flagging economy, new research warns.

A report released today from the McKell Institute think tank found China is now spending more on industrial subsidisation than on defence.

The move is designed to bolster Chinese manufacturing industries, including the refined metals sector, and stop business from heading overseas.

But it also impacts other countries, such as Australia, by increasing the cost pressures on their industries. 

Up to 73,000 jobs in the Australian regions dependent on refining and smelting are at risk, warns the institute.

One example is the town of Port Pirie in South Australia, which state ministers say requires a federal government financial bailout to keep its lead smelter going.

McKell Institute chief executive Ed Cavanough says analysis shows the community risks becoming a ghost town if the smelter closes.

“Our analysis shows that if the Port Pirie smelter were to close, the town’s population could drop by around 2000 people – that’s 11 per cent – in the first year alone,” he said.

“These would be the town’s most economically productive residents leaving with their families.

“South Australia simply cannot afford to lose industrial anchors such as the Port Pirie smelter – anchors that have sustained regional communities for generations.”

The report’s authors are urging federal government intervention to help safeguard industries and communities.

They include the Commonwealth acquiring equity in businesses it backs with a financial bailout and ensuring national infrastructure projects source domestic materials.

“Other nations have seen this and are responding strongly,” Cavanough said.

“Economies that wish to withstand future global economic shocks will need to be able to refine and process metals.

“If Australia loses those capabilities, we leave ourselves massively exposed.

“Currently, the government is playing industrial whack-a-mole – working with individual refiners to preserve individual plants as they come under threat.

“This approach is not sustainable over the longer term.”