Processing-trade-cum-FDI, Firm Heterogeneity and Exports of Indigenous Firms: Firm-level Evidence from Technology-intensive Industries in China (Xiaolan Fu)


Using firm-level panel data from China, this paper examines the impact of processing trade cum-foreign direct investment on the export performances of indigenous firms in technology-intensive industries. It finds that although a few industries have experienced rapid growth over the sample period, so far the indigenous Chinese firms have not built up their global competitiveness in the high-technology sector in general. Although processing-trade-cum-FDI has generated significant information spillovers on the export performance of indigenous firms, the technological competitiveness it enjoys has crowded the indigenous firms out off the international markets. In industries where processing trade is pervasive, the threshold productivity requirement for export market entry becomes low and firm heterogeneity in productivity turns to be a less significant factor in their export market participation.

Working Paper