IDEAS home Printed from https://ideas.repec.org/a/eee/japwor/v59y2021ics0922142521000335.html
   My bibliography  Save this article

FDI, Export Sophistication, and Quality Upgrading: Evidence from China's WTO Accession

Author

Listed:
  • Li, Yunong
  • Yang, Mengkai
  • Zhu, Lianming

Abstract

This paper identifies a positive effect of FDI liberalization on manufacturing export sophistication, exploiting China’s adjustment of its Catalogue for the Guidance of Foreign Investment Industries upon its accession to WTO. It further investigates the underlying causes in the lines of firm ownership type, trade mode, product type, and intensive vs. extensive margins. The positive effect comes from, e.g., the increase in the export share of foreign-invested enterprises (FIEs) and firms with processing trade, and the increase in the export sophistication of privately-owned enterprises (POEs), of ordinary trade, and of intermediate goods. The intensive margin rather than extensive margin is accountable for the effect. Liberalizing FDI does not seem to have any significant effect on product quality.

Suggested Citation

  • Li, Yunong & Yang, Mengkai & Zhu, Lianming, 2021. "FDI, Export Sophistication, and Quality Upgrading: Evidence from China's WTO Accession," Japan and the World Economy, Elsevier, vol. 59(C).
    • Handle: RePEc:eee:japwor:v:59:y:2021:i:c:s0922142521000335
    DOI: 10.1016/j.japwor.2021.101086
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0922142521000335
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.japwor.2021.101086?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Cesar A. Hidalgo & Ricardo Hausmann, 2009. "The Building Blocks of Economic Complexity," Papers 0909.3890, arXiv.org.
    2. Haichao Fan & Yao Amber Li & Stephen R. Yeaple, 2015. "Trade Liberalization, Quality, and Export Prices," The Review of Economics and Statistics, MIT Press, vol. 97(5), pages 1033-1051, December.
    3. Ricardo Hausmann & Jason Hwang & Dani Rodrik, 2007. "What you export matters," Journal of Economic Growth, Springer, vol. 12(1), pages 1-25, March.
    4. Zhi Wang & Shang-Jin Wei, 2010. "What Accounts for the Rising Sophistication of China's Exports?," NBER Chapters, in: China's Growing Role in World Trade, pages 63-104, National Bureau of Economic Research, Inc.
    5. Brandt, Loren & Van Biesebroeck, Johannes & Zhang, Yifan, 2012. "Creative accounting or creative destruction? Firm-level productivity growth in Chinese manufacturing," Journal of Development Economics, Elsevier, vol. 97(2), pages 339-351.
    6. Amit Khandelwal, 2010. "The Long and Short (of) Quality Ladders," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 77(4), pages 1450-1476.
    7. Lucia Foster & John C. Haltiwanger & C. J. Krizan, 2001. "Aggregate Productivity Growth: Lessons from Microeconomic Evidence," NBER Chapters, in: New Developments in Productivity Analysis, pages 303-372, National Bureau of Economic Research, Inc.
    8. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 249-275.
    9. Beata Smarzynska Javorcik, 2004. "Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers Through Backward Linkages," American Economic Review, American Economic Association, vol. 94(3), pages 605-627, June.
    10. Lu, Yi & Tao, Zhigang & Zhu, Lianming, 2017. "Identifying FDI spillovers," Journal of International Economics, Elsevier, vol. 107(C), pages 75-90.
    11. Peter K. Schott, 2008. "The relative sophistication of Chinese exports [‘Manufacturing Earnings and Compensation in China’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 23(53), pages 6-49.
    12. Shunli Yao, 2009. "Why Are Chinese Exports Not So Special?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 17(1), pages 47-65, January.
    13. Joachim Jarreau & Sandra Poncet, 2009. "Export Sophistication and Economic Performance: Evidence from Chinese Provinces," Working Papers 2009-34, CEPII research center.
    14. Xu, Bin, 2010. "The sophistication of exports: Is China special?," China Economic Review, Elsevier, vol. 21(3), pages 482-493, September.
    15. XU, Bin & LU, Jiangyong, 2009. "Foreign direct investment, processing trade, and the sophistication of China's exports," China Economic Review, Elsevier, vol. 20(3), pages 425-439, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rehman, Faheem Ur & Islam, Md. Monirul & Raza, Syed Ali, 2023. "Does disaggregate energy consumption matter to export sophistication and diversification in OECD countries? A robust panel model analysis," Renewable Energy, Elsevier, vol. 206(C), pages 274-284.
    2. Gnangnon, Sèna Kimm, 2022. "Effect of the utilization of non-reciprocal trade preferences offered by the QUAD countries on beneficiary countries' economic complexity," Journal of the Japanese and International Economies, Elsevier, vol. 65(C).
    3. Urata, Shujiro & Baek, Youngmin, 2022. "Impacts of firm's GVC participation on productivity: A case of Japanese firms," Journal of the Japanese and International Economies, Elsevier, vol. 66(C).
    4. Weixin Yang & Hao Gao & Yunpeng Yang, 2022. "Analysis of Influencing Factors of Embodied Carbon in China’s Export Trade in the Background of “Carbon Peak” and “Carbon Neutrality”," Sustainability, MDPI, vol. 14(6), pages 1-20, March.
    5. Yang, Chih-Hai, 2023. "Competition in the Chinese market: Foreign firms and markups," Journal of the Japanese and International Economies, Elsevier, vol. 67(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jarreau, Joachim & Poncet, Sandra, 2012. "Export sophistication and economic growth: Evidence from China," Journal of Development Economics, Elsevier, vol. 97(2), pages 281-292.
    2. Faqin Lin & Ermias O. Weldemicael & Xiaosong Wang, 2017. "Export sophistication increases income in sub-Saharan Africa: evidence from 1981–2000," Empirical Economics, Springer, vol. 52(4), pages 1627-1649, June.
    3. Zhu, Shujin & Fu, Xiaolan, 2013. "Drivers of Export Upgrading," World Development, Elsevier, vol. 51(C), pages 221-233.
    4. Song Zhang & Chunlai Chen, 2020. "Does Outward Foreign Direct Investment Facilitate China's Export Upgrading?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 28(5), pages 64-89, September.
    5. Huiying Zhang & Xiaohui Yang, 2016. "Intellectual Property Rights and Export Sophistication," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 7(03), pages 1-19, October.
    6. Li, Changqing & Lu, Jian, 2018. "R&D, financing constraints and export green-sophistication in China," China Economic Review, Elsevier, vol. 47(C), pages 234-244.
    7. Glawe, Linda & Wagner, Helmut, 2020. "China in the middle-income trap?," China Economic Review, Elsevier, vol. 60(C).
    8. Gabor Pula & Daniel Santabárbara, 2012. "Is china climbing up the quality ladder?," Working Papers 1209, Banco de España.
    9. Yan Du & Mengkai Yang & Jing Li & Yunong Li, 2020. "The Stagnant Export Upgrading in Northeast China: Evidence from Value‐added Tax Reform," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 28(4), pages 101-126, July.
    10. Tadashi Ito & Toshihiro Okubo, 2016. "Product Quality And Intra-Industry Trade," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 61(04), pages 1-22, September.
    11. Anwar, Sajid & Sun, Sizhong, 2018. "Foreign direct investment and export quality upgrading in China's manufacturing sector," International Review of Economics & Finance, Elsevier, vol. 54(C), pages 289-298.
    12. Xiaoping Li & Shuzhou Peng & Wei‐Chiao Huang & Qian Zhou, 2022. "What Drives Chinese Firms' Export Sophistication? A Perspective from the Rise of Minimum Wages," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 30(2), pages 28-59, March.
    13. Yan Du & Yi Lu, 2018. "The Great Opening up and the Roadmap for the Future: The Story of China's International Trade," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 26(2), pages 68-93, March.
    14. Nebojsa Stojcic & Edvard Orlic, 2016. "Foreign Direct Investment And Structural Transformation Of Exports," Economic Thought and Practice, Department of Economics and Business, University of Dubrovnik, vol. 25(2), pages 355-378, december.
    15. repec:zbw:bofitp:2012_023 is not listed on IDEAS
    16. Faheem Ur Rehman & Ejaz Ahmad & Muhammad Asif Khan & József Popp & Judit Oláh, 2021. "Does Trade Related Sectoral Infrastructure Make Chinese Exports More Sophisticated and Diversified?," Sustainability, MDPI, vol. 13(10), pages 1-21, May.
    17. Gabor Pula & Daniel Santabárbara, 2012. "Is china climbing up the quality ladder?," Working Papers 1209, Banco de España.
    18. Naima Chrid & Sami Saafi & Mohamed Chakroun, 2021. "Export Upgrading and Economic Growth: a Panel Cointegration and Causality Analysis," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 12(2), pages 811-841, June.
    19. Hsu, Wen-Tai & Lu, Yi & Luo, Xuan & Zhu, Lianming, 2023. "Foreign direct investment and industrial agglomeration: Evidence from China," Journal of Comparative Economics, Elsevier, vol. 51(2), pages 610-639.
    20. Poncet, Sandra & Starosta de Waldemar, Felipe, 2013. "Export Upgrading and Growth: The Prerequisite of Domestic Embeddedness," World Development, Elsevier, vol. 51(C), pages 104-118.
    21. Baliamoune-Lutz, Mina, 2019. "Trade sophistication in developing countries: Does export destination matter?," Journal of Policy Modeling, Elsevier, vol. 41(1), pages 39-51.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:japwor:v:59:y:2021:i:c:s0922142521000335. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505557 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.