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WTO Accession and Performance of Chinese Manufacturing Firms

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  • Brandt, Loren
  • Van Biesebroeck, Johannes
  • Wang, Luhang
  • Zhang, Yifan

Abstract

China’s policy-makers argued that WTO accession and the accompanying trade liberalization would have a beneficial impact on the domestic economy. China’s import tariffs differed tremendously across industry in the earlier years, but converged to an almost uniform low level after WTO entry. We exploit sectoral variation in the extent of tariff reduction to identify the impact of increased import competition on firm performance and its contribution to the significant productivity growth over the 1995–2007 period. We find evidence of strong downward pressure on prices and mark-ups, but limited evidence that imports took away market share from domestic firms. Furthermore, much of the effects on sectoral productivity come from changes at the extensive margin. Sectors that liberalized most tend to attract especially productive entrants, private firms in particular, which can be rationalized by an increase in the minimum productivity threshold needed to survive in these sectors.

Suggested Citation

  • Brandt, Loren & Van Biesebroeck, Johannes & Wang, Luhang & Zhang, Yifan, 2012. "WTO Accession and Performance of Chinese Manufacturing Firms," CEPR Discussion Papers 9166, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:9166
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    Cited by:

    1. Kym Anderson, 2016. "Contributions Of The Gatt/Wto To Global Economic Welfare: Empirical Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 30(1), pages 56-92, February.
    2. Hans-Jörg Schmerer & Luhang Wang, 2014. "Firm Performance and Trade with Low-Income Countries: Evidence from China," CESifo Working Paper Series 4934, CESifo Group Munich.
    3. Justin R. Pierce & Peter K. Schott, 2016. "The Surprisingly Swift Decline of US Manufacturing Employment," American Economic Review, American Economic Association, vol. 106(7), pages 1632-1662, July.
    4. Ari Van Assche & Jo Van Biesebroeck, 2017. "Functional upgrading in China’s export processing sector," Working Papers Department of Economics 590692, KU Leuven, Faculty of Economics and Business, Department of Economics.
    5. Maria D. Tito & Ruoying Wang, 2017. "Exporting and Frictions in Input Markets : Evidence from Chinese Data," Finance and Economics Discussion Series 2017-077, Board of Governors of the Federal Reserve System (U.S.).
    6. Yifan ZHANG, 2014. "Productivity Evolution of Chinese Large and Small Firms in the Era of Globalisation," Working Papers DP-2014-13, Economic Research Institute for ASEAN and East Asia (ERIA).
    7. Justin R. Pierce & Peter K. Schott, 2017. "Investment Responses to Trade Liberalization : Evidence from U.S. Industries and Establishments," Finance and Economics Discussion Series 2017-120, Board of Governors of the Federal Reserve System (U.S.).
    8. Pavcnik, Nina, 2017. "The Impact of Trade on Inequality in Developing Countries," CEPR Discussion Papers 12331, C.E.P.R. Discussion Papers.
    9. repec:eee:chieco:v:47:y:2018:i:c:p:77-95 is not listed on IDEAS
    10. Nina Pavcnik, 2017. "The Impact of Trade on Inequality in Developing Countries," NBER Working Papers 23878, National Bureau of Economic Research, Inc.
    11. Ryan Monarch, 2014. ""It's Not You, It's Me": Breakup In U.S.-China Trade Relationships," Working Papers 14-08, Center for Economic Studies, U.S. Census Bureau.
    12. repec:eee:chieco:v:45:y:2017:i:c:p:168-194 is not listed on IDEAS
    13. Du, Luosha & Harrison, Ann & Jefferson, Gary, 2014. "FDI Spillovers and Industrial Policy: The Role of Tariffs and Tax Holidays," World Development, Elsevier, vol. 64(C), pages 366-383.
    14. repec:eee:chieco:v:47:y:2018:i:c:p:245-262 is not listed on IDEAS
    15. Michele Imbruno, 2014. "Trade Liberalization, Intermediate Inputs and Firm Efficiency: Direct versus Indirect Modes of Import," Discussion Papers 2014-02, University of Nottingham, GEP.
    16. Imbruno, Michele, 2016. "China and WTO liberalization: Imports, tariffs and non-tariff barriers," China Economic Review, Elsevier, vol. 38(C), pages 222-237.
    17. Bas, Maria & Strauss-Kahn, Vanessa, 2015. "Input-trade liberalization, export prices and quality upgrading," Journal of International Economics, Elsevier, vol. 95(2), pages 250-262.
    18. Yifan Zhang, . "Productivity Evolution of Chinese Large and Small Firms in the Era of Globalization," Chapters, Economic Research Institute for ASEAN and East Asia (ERIA).

    More about this item

    Keywords

    China; Productivity; Tariff; Trade liberalization;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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