IDEAS home Printed from https://ideas.repec.org/a/eee/streco/v75y2025icp439-450.html

The Supply chain spillovers of Pilot Free Trade Zones on GVC upgrading of Chinese firms

Author

Listed:
  • Huang, Yongming
  • Li, Xin
  • Liu, Changwei

Abstract

Pilot Free Trade Zones (PFTZs) represent a pivotal national strategy for advancing China’s high-quality opening up, which offer a quasi-natural experiment to test the supply chain spillovers. By constructing the panel data of Chinese A-share listed firms during the period of 2008 to 2016, this study examines the spillover effects of PFTZs on firms’ GVC positions through supply chain linkages utilizing DID method. The results indicate that PFTZs significantly improve GVC positions of both upstream and downstream firms. Specifically customers in PFTZs enhance their suppliers’ GVC positions by triggering innovation, while suppliers in PFTZs facilitate their customers’ GVC upgrading through cost reduction. These spillovers exhibit significant heterogeneity across financial constraints, market concentration, and regions. In addition, this study reveals that PFTZs exert significantly negative effects on GVC positions of downstream SMEs, whereas the positive effects on upstream SMEs’ GVC positions are not statistically significant. The implication of these findings is that greater policy attention should be paid to supply chain spillover mechanisms, considering their heterogeneous effects across customers, suppliers, and regions.

Suggested Citation

  • Huang, Yongming & Li, Xin & Liu, Changwei, 2025. "The Supply chain spillovers of Pilot Free Trade Zones on GVC upgrading of Chinese firms," Structural Change and Economic Dynamics, Elsevier, vol. 75(C), pages 439-450.
    • Handle: RePEc:eee:streco:v:75:y:2025:i:c:p:439-450
    DOI: 10.1016/j.strueco.2025.08.011
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0954349X25001419
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.strueco.2025.08.011?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

    for a different version of it.

    References listed on IDEAS

    as
    1. Jijun Yang & Yanli Li & Feng Dai & Jinlan Ni, 2025. "How can pilot free trade zones affect regional technology innovation? –evidence from China at the city level," Applied Economics, Taylor & Francis Journals, vol. 57(2), pages 216-231, January.
    2. Arthur Lewbel, 2012. "Using Heteroscedasticity to Identify and Estimate Mismeasured and Endogenous Regressor Models," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 30(1), pages 67-80.
    3. Andrea Andrenelli & Iza Lejárraga & Sébastien Miroudot & Letizia Montinari, 2019. "Micro-Evidence on Corporate Relationships in Global Value Chains: The Role of Trade, FDI and Strategic Partnerships," OECD Trade Policy Papers 227, OECD Publishing.
    4. Alonso Alfaro-Ureña & Isabela Manelici & Jose P Vasquez, 2022. "The Effects of Joining Multinational Supply Chains: New Evidence from Firm-to-Firm Linkages," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 137(3), pages 1495-1552.
    5. Khorana, Sangeeta & Escaith, Hubert & Ali, Salamat & Kumari, Sushma & Do, Quynh, 2022. "The changing contours of global value chains post-COVID: Evidence from the Commonwealth," Journal of Business Research, Elsevier, vol. 153(C), pages 75-86.
    6. Lachenmaier, Stefan & Rottmann, Horst, 2011. "Effects of innovation on employment: A dynamic panel analysis," International Journal of Industrial Organization, Elsevier, vol. 29(2), pages 210-220, March.
    7. Clément de Chaisemartin & Xavier D'Haultfœuille, 2020. "Two-Way Fixed Effects Estimators with Heterogeneous Treatment Effects," American Economic Review, American Economic Association, vol. 110(9), pages 2964-2996, September.
    8. Cao, Xiaping & Cumming, Douglas & Zhou, Sili, 2020. "State ownership and corporate innovative efficiency," Emerging Markets Review, Elsevier, vol. 44(C).
    9. Jan De Loecker & Jan Eeckhout & Gabriel Unger, 2020. "The Rise of Market Power and the Macroeconomic Implications [“Econometric Tools for Analyzing Market Outcomes”]," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(2), pages 561-644.
    10. Chor, Davin & Manova, Kalina & Yu, Zhihong, 2021. "Growing like China: Firm performance and global production line position," Journal of International Economics, Elsevier, vol. 130(C).
    11. Daqing Yao & John Whalley, 2016. "The China (Shanghai) Pilot Free Trade Zone: Background, Developments and Preliminary Assessment of Initial Impacts," The World Economy, Wiley Blackwell, vol. 39(1), pages 2-15, January.
    12. Pan, An & Cao, Xuekang, 2024. "Pilot free trade zones and low-carbon innovation: Evidence from listed companies in China," Energy Economics, Elsevier, vol. 136(C).
    13. Pipkin, Seth & Fuentes, Alberto, 2017. "Spurred to Upgrade: A Review of Triggers and Consequences of Industrial Upgrading in the Global Value Chain Literature," World Development, Elsevier, vol. 98(C), pages 536-554.
    14. Goodman-Bacon, Andrew, 2021. "Difference-in-differences with variation in treatment timing," Journal of Econometrics, Elsevier, vol. 225(2), pages 254-277.
    15. Hao Chen & Bo Yuan & Qi Cui, 2021. "Does the pilot free trade zone policy attract the entering of foreign-invested enterprises? The evidence from China," Applied Economics Letters, Taylor & Francis Journals, vol. 28(14), pages 1162-1168, August.
    16. Shuijun Peng & Lamei Wu & Liang Zhang, 2024. "Environmental regulations in developing countries and the span of firms' production stages: Evidence from China," The World Economy, Wiley Blackwell, vol. 47(8), pages 3421-3449, August.
    17. Ying Jiang & Dongshen Cheng, 2024. "Local demand and firms’ upgrading in global value chains: Evidence from China," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 33(8), pages 1544-1576, November.
    18. Zhi Wang & Shang-Jin Wei & Xinding Yu & Kunfu Zhu, 2017. "Characterizing Global Value Chains: Production Length and Upstreamness," NBER Working Papers 23261, National Bureau of Economic Research, Inc.
    19. Michael Storper & Anthony J. Venables, 2004. "Buzz: face-to-face contact and the urban economy," Journal of Economic Geography, Oxford University Press, vol. 4(4), pages 351-370, August.
    20. Lu, Yue & Shi, Huimin & Luo, Wei & Liu, Bin, 2018. "Productivity, financial constraints, and firms' global value chain participation: Evidence from China," Economic Modelling, Elsevier, vol. 73(C), pages 184-194.
    21. Pol Antràs & Teresa C. Fort & Felix Tintelnot, 2017. "The Margins of Global Sourcing: Theory and Evidence from US Firms," American Economic Review, American Economic Association, vol. 107(9), pages 2514-2564, September.
    22. Li, Xibao, 2012. "Behind the recent surge of Chinese patenting: An institutional view," Research Policy, Elsevier, vol. 41(1), pages 236-249.
    23. Danni Lang, 2025. "Have the PFTZs narrowed the regional economic gap? – Verification based on difference in differences method," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 34(1), pages 197-212, January.
    24. Jim Goldman & Philip Strahan, 2020. "Government as Customer of Last Resort: The Stabilizing Effects of Government Purchases on Firms," The Review of Financial Studies, Society for Financial Studies, vol. 33(2), pages 610-643.
    25. Zou, Tanyong, 2024. "Technological innovation promotes industrial upgrading: An analytical framework," Structural Change and Economic Dynamics, Elsevier, vol. 70(C), pages 150-167.
    26. Jing Tan & Yaqiao Zhang & Hui Cao, 2023. "The FDI-spawned technological spillover effects on innovation quality of local enterprises: evidence from industrial firms and the patents in China," Applied Economics, Taylor & Francis Journals, vol. 55(49), pages 5800-5815, October.
    27. Charles J. Hadlock & Joshua R. Pierce, 2010. "New Evidence on Measuring Financial Constraints: Moving Beyond the KZ Index," The Review of Financial Studies, Society for Financial Studies, vol. 23(5), pages 1909-1940.
    28. Merkert, Rico & Mulley, Corinne & Hakim, Md Mahbubul, 2018. "Trade-offs between transaction cost, operation cost and innovation in the context of procurement and asset specificity – The example of the bus industry," Research in Transportation Economics, Elsevier, vol. 69(C), pages 173-179.
    29. Guan, Chenghua & Huang, Jinyuan & Jiang, Ruyue & Xu, Wanting, 2023. "The impact of pilot free trade zone on service industry structure upgrading," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 472-491.
    30. Te Bao & Yun Dai & Yanxiang Feng & Shuai Liu & Ruixin Wang, 2023. "Trade liberalisation and trade and capital flows: Evidence from China pilot free trade zones," The World Economy, Wiley Blackwell, vol. 46(5), pages 1408-1422, May.
    Full references (including those not matched with items on IDEAS)

    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. Luo, Lianfa & Cheng, Zhiming & Ye, Qingqing & Cheng, Yanjun & Smyth, Russell & Yang, Zhiqing & Zhang, Le, 2024. "Nonmonetary awards and innovation: Evidence from winning China's Top Brand Contest," China Economic Review, Elsevier, vol. 86(C).
    2. Wenqi Jing & Yi Zheng & Xiuqing Shen, 2024. "Does the establishment of Pilot Free Trade Zones promote international expansion of enterprises? Quasi-natural experimental evidence from China," PLOS ONE, Public Library of Science, vol. 19(8), pages 1-22, August.
    3. Zou, Tao & Li, Shasha & Dai, Yixin, 2025. "Does the pilot free trade zone promote “quality improvement and quantity increase” of the city’s export trade?," Economic Analysis and Policy, Elsevier, vol. 87(C), pages 1323-1341.
    4. Cao, June & Huang, Zijie & Kristanto, Ari Budi, 2025. "From bytes to blooms: Tech-driven transformation and green revenues," Energy Economics, Elsevier, vol. 144(C).
    5. Mensah, Justice Tei & Wankuru, Peter Chacha & Kirui, Benard K., 2025. "Public Procurement and Firms : Evidence from Kenya," Policy Research Working Paper Series 11227, The World Bank.
    6. Zou, Ganna & Zhang, Shengbo & Gan, Xingqiong & Cheng, Hua, 2025. "How government green procurement incentivises corporate green innovation? Evidence from China," Economic Analysis and Policy, Elsevier, vol. 86(C), pages 1605-1626.
    7. Chen, Jiahui & Shi, Jinchuan & Wang, Zheng & Zeng, Shirong & Zhou, Zhuo, 2025. "The power of wings: How air connections fuel cross-regional collaboration in China?," China Economic Review, Elsevier, vol. 92(C).
    8. Li, Zhaohua & Pang, Suqin & Zhu, Zhiyun, 2024. "The impact of pilot free trade zones on entrepreneurship: Evidence from a quasi-natural experiment in China," Socio-Economic Planning Sciences, Elsevier, vol. 92(C).
    9. Cathcart, Lara & Dufour, Alfonso & Rossi, Ludovico & Varotto, Simone, 2024. "Corporate bankruptcy and banking deregulation: The effect of financial leverage," Journal of Banking & Finance, Elsevier, vol. 166(C).
    10. Philipp Barteska & Jay Euijung Lee, 2024. "Bureaucrats and the Korean export miracle," Discussion Papers 2024-11, Nottingham Interdisciplinary Centre for Economic and Political Research (NICEP).
    11. Fabrizio Leone, 2023. "Multinationals, robots and the labor share," CEP Discussion Papers dp1900, Centre for Economic Performance, LSE.
    12. Alonso Alfaro-Urena & Benjamin Faber & Cecile Gaubert & Isabela Manelici & Jose P Vasquez, 2022. "Responsible sourcing? Theory and evidence from Costa Rica," POID Working Papers 042, Centre for Economic Performance, LSE.
    13. Philipp Barteska & Jay Euijung Lee, 2025. "Personnel is policy (implementation): Bureaucrats and the Korean export miracle," CEP Discussion Papers dp2099, Centre for Economic Performance, LSE.
    14. Zhang, Jingxue & Yu, Shiwei & Zhang, Yue-Jun & Su, Bin & Sun, Ya-Fang, 2025. "How do renewable energy policies affect energy green development? Evidence from Chinese listed energy firms," Energy Economics, Elsevier, vol. 142(C).
    15. Xu, Xiangbing & Dong, Nanyan & Wu, Chengzhang & Luo, Sicheng, 2025. "The employment effects of anticorruption: Evidence from China," Emerging Markets Review, Elsevier, vol. 66(C).
    16. Ivanov, Ivan T. & Pettit, Luke & Whited, Toni, 2021. "Taxes Depress Corporate Borrowing: Evidence from Private Firms," IHS Working Paper Series 32, Institute for Advanced Studies.
    17. Li, Lei & Liu, Bocong & Sheng, Bin & Wang, Tianyu, 2025. "“A tale of two rails”: Transportation infrastructure and technological spillovers from R&D center foreign firms," China Economic Review, Elsevier, vol. 90(C).
    18. Zhang, Linghao & Jin, Xinwei & Wu, Kai, 2025. "How do common institutional investors adapt to early technology adoption?," Journal of Business Research, Elsevier, vol. 199(C).
    19. Liu, Biao & Li, Yanfeng & Liu, Jipeng & Hou, Yufei, 2024. "Does urban innovation policy accelerate the digital transformation of enterprises? Evidence based on the innovative City pilot policy," China Economic Review, Elsevier, vol. 85(C).
    20. Xu, Shiteng & Shen, Ronghua & Zhang, Yahua & Cai, Yifei, 2024. "Fostering regional innovation efficiency through pilot free trade zones: Evidence from China," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 356-367.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    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:streco:v:75:y:2025:i:c:p:439-450. 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/525148 .

    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.