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Emerging Trade Battlefield with China: Export Competition and Firms’ Coping Strategies

Author

Listed:
  • Yao Pan

    (George Washington University)

  • Katariina Nilsson Hakkala

    (ETLA and Aalto University)

Abstract

This paper analyzes how intensified Chinese export competition affects the exports and product ranges of Western firms. Using a novel identification strategy that exploits changes in Chinese export policies, we find that Chinese export competition reduces aggregate product-level exports of Finland. Firm-level analysis using administrative data further shows that Chinese competition leads to substantial price cuts to retain market shares, especially for homogeneous products. In addition, we also discover that firms respond to the increased level of Chinese export competition by dropping their marginal products. Taken together, these results highlight the importance of export competition with China for developed countries.

Suggested Citation

  • Yao Pan & Katariina Nilsson Hakkala, 2019. "Emerging Trade Battlefield with China: Export Competition and Firms’ Coping Strategies," Working Papers 2019-14, The George Washington University, Institute for International Economic Policy.
    • Handle: RePEc:gwi:wpaper:2019-14
    as

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    File URL: http://www2.gwu.edu/~iiep/assets/docs/papers/2019WP/PanIIEP2019-14.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Trade Flows; Export Competition; Firm-level; Product Mix; China;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F61 - International Economics - - Economic Impacts of Globalization - - - Microeconomic Impacts
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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