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Trading Partners, Traded Products, and Firm Performances: Evidence from China’s Exporter-Importers

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  • Zheng Wang
  • Zhihong Yu

Abstract

In this study we explore a newly available unique dataset that links China’s international trade transactions to a comprehensive firm-level data in China’s manufacturing sector, and establish a number of interesting stylized facts linking firms’ key economic performance to their exporting-importing behaviour. One novelty of our analysis is we distinguish between ordinary trade and processing trade; the latter involves importing inputs and materials to be assembled and re-exported to the overseas market. Several novel patterns emerge. First, we discover significant heterogeneity within two-way traders – in terms of size, productivity and factor intensity – depending on their engagement in processing exports/imports. Whilst the existing literature typically finds that two-way traders are larger and more productive than one-way traders, we show that pure processing two-way traders are actually the least productive and exhibit the lowest capita/skill intensity compared to one way traders. By contrast, firms conducting both ordinary and processing trade are the largest, most productive and capital intensive among all trading firms. Second, consistent with the market hierarchy hypothesis, larger and more productive firms trade with a larger number of trade partners with tougher market conditions characterized by longer distances and smaller market size. Remarkably, this pattern is highly symmetric between exports and imports, as well as ordinary and processing trade. Third, firms with greater capital and skill intensities source their inputs from countries with higher income per capita, and this pattern holds only for ordinary imports but not processing imports. Fourth, larger firms trade a larger number of products with greater average product complexity as proxied by Nunn’s contract intensity measure. Fifth, controlling firm size, more productive and capital intensive firms export less complex products but import more complex ordinary inputs. Whilst some of the above findings confirm existing stylized facts reported for other countries, some patterns we discover are new to the literature and remain to be reconciled with the heterogeneous firm trade theory.

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Bibliographic Info

Paper provided by University of Nottingham, GEP in its series Discussion Papers with number 11/13.

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Handle: RePEc:not:notgep:11/13

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Keywords: Firm Heterogeneity; Exports and Imports; Traded Products; Trade Partners; Factor Intensity;

References

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  1. Bernard, A., 1997. "Exceptional Exporter Performance: Cause, Effect, or Both?," Working papers 97-21, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Nunn, Nathan, 2007. "Relationship-Specificity, Incomplete Contracts, and the Pattern of Trade," Scholarly Articles 4686801, Harvard University Department of Economics.
  3. Chang-Tai Hsieh & Peter Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," Working Papers 09-04, Center for Economic Studies, U.S. Census Bureau.
  4. Alexander Vogel & Joachim Wagner, 2010. "Higher productivity in importing German manufacturing firms: self-selection, learning from importing, or both?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 145(4), pages 641-665, January.
  5. Paula Bustos, 2009. "Trade liberalization, exports and technology upgrading: Evidence on the impact of MERCOSUR on Argentinean firms," Economics Working Papers 1173, Department of Economics and Business, Universitat Pompeu Fabra.
  6. Robert Koopman & Zhi Wang & Shang-Jin Wei, 2008. "How Much of Chinese Exports is Really Made In China? Assessing Domestic Value-Added When Processing Trade is Pervasive," NBER Working Papers 14109, National Bureau of Economic Research, Inc.
  7. James E. Rauch, 1996. "Networks versus Markets in International Trade," NBER Working Papers 5617, National Bureau of Economic Research, Inc.
  8. James Levinsohn & Amil Petrin, 2000. "Estimating Production Functions Using Inputs to Control for Unobservables," NBER Working Papers 7819, National Bureau of Economic Research, Inc.
  9. Lawless, Martina, 2009. "Firm export dynamics and the geography of trade," Journal of International Economics, Elsevier, vol. 77(2), pages 245-254, April.
  10. Lu, Jiangyong & Lu, Yi & Tao, Zhigang, 2010. "Exporting behavior of foreign affiliates: Theory and evidence," Journal of International Economics, Elsevier, vol. 81(2), pages 197-205, July.
  11. Richard Upward & Zheng Wang & Jinghai Zheng, . "Weighing China's Export Basket: An Account of the Chinese Export Boom, 2000--2007," Discussion Papers 10/14, University of Nottingham, GEP.
  12. Kalina Manova & Zhiwei Zhang, 2009. "Export Prices Across Firms and Destinations," NBER Working Papers 15342, National Bureau of Economic Research, Inc.
  13. Richard Baldwin & James Harrigan, 2007. "Zeros, Quality and Space: Trade Theory and Trade Evidence," NBER Working Papers 13214, National Bureau of Economic Research, Inc.
  14. Sourafel Girma & Yundan Gong & Holger Gˆrg & Zhihong Yu, 2009. "Can Production Subsidies Explain China's Export Performance? Evidence from Firm-level Data," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(4), pages 863-891, December.
  15. Hongbin Cai & Qiao Liu, 2009. "Competition and Corporate Tax Avoidance: Evidence from Chinese Industrial Firms," Economic Journal, Royal Economic Society, vol. 119(537), pages 764-795, 04.
  16. Davide Castellani & Francesco Serti & Chiara Tomasi, 2008. "Firms in International Trade: Importers and Exporters Heterogeneity in the Italian Manufacturing Industry," LEM Papers Series 2008/04, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  17. Kalina Manova & Zhiwei Zhang, 2009. "China's Exporters and Importers: Firms, Products and Trade Partners," NBER Working Papers 15249, National Bureau of Economic Research, Inc.
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Cited by:
  1. Gourdon, Julien & Monjon, Stéphanie & Poncet, Sandra, 2014. "Incomplete VAT rebates to exporters : how do they affect China's export performance?," Economics Papers from University Paris Dauphine 123456789/13784, Paris Dauphine University.

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