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Does economic sanctions bring risks to technological innovation in China?

Author

Listed:
  • Zhai, Yuhang
  • He, Wei
  • Zhao, Xinxin
  • Shi, Yaobo

Abstract

This paper studies the effect of economic sanctions on China's technological innovation, and conducts an empirical test based on the unbalanced panel data of 31 provinces in China from 1991 to 2018. The empirical results of this paper show that: (1) During the sample period, economic sanctions significantly suppressed China's technological innovation level. (2) The occurrence of economic sanctions can significantly inhibit the effective play of the innovative scale effect and reverse force effect of free trade by cutting off the personnel and technical links between the target country and the sender, undermining the financial stability and investor confidence of the target country, as well as limiting international trade, thereby reducing the China's technological innovation level. (3) Provinces with higher R&D support policies and more optimized industrial structure have smaller adverse effects of economic sanctions on technological innovation. Based on the research conclusions, this paper also puts forward corresponding policy suggestions on how China should deal with economic sanctions and improve the level of technological innovation.

Suggested Citation

  • Zhai, Yuhang & He, Wei & Zhao, Xinxin & Shi, Yaobo, 2025. "Does economic sanctions bring risks to technological innovation in China?," Economic Analysis and Policy, Elsevier, vol. 86(C), pages 812-825.
    • Handle: RePEc:eee:ecanpo:v:86:y:2025:i:c:p:812-825
    DOI: 10.1016/j.eap.2025.03.047
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    Keywords

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    JEL classification:

    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • F6 - International Economics - - Economic Impacts of Globalization

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