They do subsidize through rates. The UPU is set up so that the last mile of a receiving country is charged to the sender as if it were in the sender's country. This is made up from other revenue the carrier in the receiving country makes.
The USPS can't increase their domestic prices but there is good indication that they are charging more to offset this. There are complaints in this thread even about the cost of shipping abroad, as international shipping is not regulated like domestic postage rates if I remember right. So the USPS uses outbound international shipments as a cost center to make up for the subsidy to China.
The article states there is a ~$500M subsidy to China through UPU rates.