The “International Trade Research Trend” section aims to release the latest research findings in the field of international trade published in authoritative Chinese journals such as “Social Sciences in China,” “Economic Research Journal,” “Journal of Management World,” “China Economic Quarterly,” and “The Journal of World Economy.” It strives to provide everyone with timely, accurate, and high-quality front-line dynamics in the field of international trade.

Economic Research Journal

Third-country Effects of Regional Deep Trade Agreements and Enterprise Export Survival: A Perspective of Information Costs

HAN Jiana , LIU Yiqun and ZHENG Hang

Summary: Exportation has been a significant driving force behind China’s rapid economic growth. However, in recent years, China’s exports have faced multiple constraints on both economic and non-economic fronts due to the uncertain trade environment, which has led to increased downward pressure on exports. Therefore, the urgent challenges in current foreign trade efforts are enhancing trade resilience and achieving progress while maintaining export stability. Furthermore, China’s exports should also establish diverse cooperative partnerships and economic relations while maintaining stability. However, according to existing literature, efforts to diversify exports, such as the export trials, may result in less stable export relationships, making it difficult to achieve both diversity and stability in exports. Given the complex and severe external circumstances and the urgent need to maintain diverse and stable economic and trade relationships, it is important to study how to enhance stability while developing diverse economic and trade relationships. This holds important theoretical and practical significance for enhancing China’s trade resilience and promoting the sustainable development of exports over the long term.

This paper estimates the impact of the regional trade agreement (RTA) between new and old destination countries on the export survival probability of China’s enterprises and its mechanism. The exogenous indicators of the third-country effects are constructed by combining the China Customs Enterprise Database and the World Bank Deep Trade Agreement Database. The results show that the export survival probability of China’s enterprises is significantly improved by concluding RTA between new and old destination countries and increasing the depth of RTA. It is found that the spillover effects of WTO-Plus provisions, WTO-X provisions, and non-discrimination provisions are significant and positive, while the preferential provisions have negative effects. The mechanism tests suggest that concluding RTA between new and old destination countries improves the export survival probability of China’s enterprises by reducing export information costs, including incomplete contracts and standard coordination. The exploratory analysis demonstrates that the deepening of RTA between China and its contracting countries has similar effects on third countries.

The potential marginal contributions of this paper are as follows. Firstly, this paper examines the impact of RTA between new and old destination countries on China’s enterprises about export survival. The focus is under the policy guidance of “endeavoring the diversity and stability of the international economic landscape and economic and trade relations”. The research conclusions not only clarify the relationship between enterprises’ selection of export markets and their export survival at the micro level but also have important practical significance for achieving “diversity and stability” in China’s exports at the macro level. Meanwhile, it is beneficial to literature on export stability. Secondly, this paper explores the sources of third-party effects in detail, distinguishing the categories and attributes of the provisions from the perspective of RTA texts. It is found that the deepening of behind-the-border provisions, such as WTO-X provisions, provide third-country effects. Further exploratory work has been conducted on the sources of the third-country effects when focusing on the connotation of the effects. In addition, this paper extends the research perspective from enterprise entry to post-entry export dynamics. This paper further clarifies the mechanism of the third-country effects from the perspective of information costs. Finally, this paper proves that the deepening of China’s RTA has a positive spillover effect on China’s enterprise exports to third countries. These research conclusions provide empirical support for China’s current strategy of complying with the trend of regional economic integration in the world and actively promoting the construction of free trade zones.

Keywords: Regional Trade Agreement; Third-country Effect; Information Cost; Export Survival

JEL Classification: F15, F18, F23

Journal of Management World
Measurement, Structure, and International Comparison of Risk Exposures in China's Industry Chains: A Perspective Based on Production Chain Length

Ni Hongfua,b, Zhong Daochengc and Fan Zijied

Abstract: Ensuring the secure operation of industrial chains has been a focal point in the progress of Chinese modernization and a key aspect of enhancing the modernization level of its industrial and supply chains. However, there is a relative lack of measurement indicators for tracking industry chain risks, and conceptual confusion exists. Therefore, this paper proposes new concepts and indicators for global industry chain (GIC) risk exposures and risk-return ratios, based on the perspective of production chain length in global value chains (GVC), incorporating factors such as bilateral relationships between countries and the degree of non-substitutability, and conducts empirical calculations. The research findings are as follows: (1) Overall, the risk exposures of China's industry chain on the demand and supply sides, as measured by different methods, exhibit an initial upward trend followed by a downward trend. However, not considering factors such as bilateral relationships between countries and the non-substitutability of production stages, or using traditional measures of GVC participation, China's industry chain risk exposures will be underestimated. (2) There are significant variations in risk exposures across different industries and technological levels. Manufacturing, services, and agriculture industries have descending levels of risk exposures, with approximately one-third of the production length in high-tech manufacturing exposed to foreign markets, posing a higher risk of disruption due to external shocks. (3) China's risk exposure on the demand side of industry chains is at a medium level, higher than that of the United States but lower than other developed countries worldwide. China faces greater risks than returns in global trade, whereas other countries benefit more in their trade with China. (4) Overall, the risk exposures of industry chains in different sectors of countries serve as a monitoring and early warning mechanism. Specifically, the greater the risk exposure of a sector in a country, the larger the potential decline in trade volume under adverse shocks.

Keywords: global industry chains; risk exposure; vulnerability; industry chain resilience; production length

JEL Classification: F13, F14, F15

Coexistence and Win-win Cooperation of Domestic and Foreign Enterprises: Analyses Based on A New Value Chain Accounting Framework with Interactions of International and Domestic Markets and Resources

Peng Shuijun, Li Zhixu and Huang Xin

Abstract: To foster the new development paradigm with domestic circulation as the mainstay and domestic and international circulations reinforcing each other, it is key to enhance the interaction of international and domestic markets and resources, and to achieve their high-level coordinated development. Employing the international input-output tables from the Analytical AMNE database of OECD which distinguishes firm ownership, we propose a new national value chain decomposition framework that reflects interaction of international and domestic markets and resources, which allows us to quantify the extent of interaction of international and domestic markets and resources, and their driving effects on domestic economic growth. The main findings are as follows: first, facing external risks and the structural transformation, China's domestic market has larger advantages of both stability and reliability than foreign markets, reflecting the importance of self-driven domestic circulation. Second, there is a phenomenon of the coexistence of competition and cooperation with the extent of the latter deepening gradually: While foreign firms in manufacturing tend to layout closed supply chains in China, especially in the medium and high R&D intensive sectors, domestic and foreign firms tend to gain larger shares of value added through cooperating with each other. Third, results of the Structural Decomposition Analysis (SDA) methodology show that the enlarging scale and the structural improvement of domestic market have played important roles in stimulating the steady growth in domestic and foreign economies, and that the contribution of domestic-foreign (foreign-domestic) industry linkage effect to the growth in domestic (foreign) economy has kept increasing. The results provide evidences that support the coordinated development of demand and investment from both domestic and abroad. Finally, applying the Structural Path Analysis (SPA) methodology, we explored the key paths to enhance the interaction and coordinated development of international and domestic markets and resources. The results shed light on how to release the potential of market demand and improve the economic structure on the demand side, and on how to attract foreign investment of high quality and strengthen the cooperation between domestic and foreign firms on the supply side. This paper has important policy implications on building the new development paradigm and promoting high-quality development.

Keywords: international input-output model disting

JEL Classification: C67, F10, F21

China Economic Quarterly
Human Capital Accumulation, Trade, and China'sFirmsInnovation

ZHANG Liang, QIU Bin, WU Lamei and PENG Tingting

Abstract:Human capital is an important factor in driving economic growth.We use the DID method to identify the causal effects of human capital accumulation on Chinese firms’ innovation.We find that human capital accumulation has a significant positive effect on firms’ innovation behavior and quality.In addition,trade is the key mechanism.Human capital accumulation promotes firms’ innovation through both the “factor aggregation effect”brought by import competition and the“market expansion effect”by learning effects in the export markets.The results reveal then ecessity of human capital accumulation and the importance of innovation through trade openness.

Keywords: human capital;trade openness;firm innovation

JELClassification:E24,L25,F16

Import Liberalization and the Choice of Corporate Capital Structure

LU Xiaoqin,FENG Ling and PEI Tingting

Abstract:A simple theoretical model demonstrates that import liberalization may induce firms to switch to long-term bond financing.Evidence from Chinese manufacturing firms supports model predictions,and shows that tariff reductions are associated with falling short-term leverage ratios but rising long-term leverage ratios.In particular,small-scale companies tend to reduce short-term leverage.Additionally,financing constraints may also limit theability of firms’capital structure adjustment.The paper suggests that actively expanding imports,opening up domestic markets,and promoting the development of direct-financing capital markets,especially the long-term corporated ebtmarkets,will contribute to the implementation of China’s“structuraldeleveraging”policy.

Keywords:importliberalization;capitaltermstructure;structuraldeleveraging

JELClassification:F13,F14,G32

Impact of Trade Liberalization and Regional Trade Propagation from the Perspective of Production Network —Based on the Empirical Study of China (FuJian) Pilot Free Trade Zone

LIANGRuobing,WANGYingjie

Abstract:Taking the establishment of Fujian Pilot Free Trade Zone as an exogenous impact,weat tempt to investigate the promotion effect of foreign trade policy on intra-regional trade and its transmission in the production network.The analysis shows that the establishment of pilot free trade zone significantly promotes the trade growth of enterprises in the area,the expansion of trade network scale and the deep integration of upstream and downstream industrial chain.In addition,the trade promotion effect will spread to the upper and downstream two orders along the production chain.

Keywords:productionnetwork;tradeliberalization;regionaltradepropagation

Jelclassition:R12，O24，F13

The Journal of World Economy
RMB Cross-Border Settlement Reform and Corporate Exports

Sun Puyang; Xu Qian; Yu Chunhai

Abstract: Based on the “List of Pilot Exporting Enterprises for Cross-border Trade RMB Settlement” launched by China in 2009, this paper examines the micro-level impact of the pilot local currency settlement policy on the export of Chinese enterprises and conducts an in-depth study of the impact mechanisms of variable and fixed exchange costs. The study finds that, first, the use implementation of local currency settlement can significantly promote corporate exports. Second, corporate exports, which are more sensitive to exchange costs, are more strongly influenced by the settlement reform. As exports to destination countries sign local currency swap agreements with China, variable exchange costs decline, significantly amplifying the impact the settlement reform has on them. On the other hand, non-intermediaries are more responsive to fixed exchange costs, making the reform more significant for their exports. Finally, after using the stacked DID and instrumental variables techniques to eliminate the influence of the border trade settlement reform advancement and pilot randomness, the fundamental conclusion remains valid. Overall, this paper employs the settlement reform to demonstrate the positive effect of cross-border trade local currency settlement on China’s exports from a business perspective, providing micro-evidence to further improve trade facilitation.

Key words: settlement method, exchange costs, corporate exports, border trade

JEL codes: D23, F14, P21

Domestic and International Economic Cycles, Industrial Structure and Changes in the Aggregate Share of Labour Income

Tian Ye; Ni Hongfu; Xia Jiechang

Abstract: The evolution of domestic and international economic cycles is accompanied by changes in industrial structure, which in turn affects the aggregate share of labour income. This paper constructed a decomposition framework for domestic and international economic cycles and its factor structure of macro-labour income share changes, and the global input-output table from 1997 to 2020 is used for calculation and analysis. The findings suggest that: (1) The intra-industry effect is the dominant factor producing changes in China’s macro-labour income share at each stage, the industrial structure effect is also significant when China’s industrial structure undergoes major changes. (2) The contribution of the domestic economic cycle and that of the international economic cycle to changes in the macro-labour income share at each stage are opposite. The domestic economic cycle plays a dominant role in contributing to the industrial structure effects, the decline in the degree of domestic economic circulation will reduce the macro-labour income share. In other word, the greater the degree of international economic cycle (external circulation), the macro-labour income share is lower. (3) The expansion of domestic demand scale in the domestic economic cycle makes a significant positive contribution at all stages. The gradual increase in the proportion of service inputs in the domestic production network is also conducive to increasing China’s macro-labour income share. The expansion of final demand exports and the structural effects of international production networks on the international economic cycle further exhibit considerable positive effects at different stages.

Key words: macro-labour income share, industrial structure, domestic and international economic cycles, input-output model

JEL codes: F63, F13

International Submarine Optical Cables, Bilateral Information Flow and Chinese Cross-Border M&A

Ma Shuzhong; Wu Peng; Fang Chao

Abstract: Submarine optical cables are the most important carrier of cross-border information, and they are of strategic significance in the digital economy era. This paper takes the Asia-Africa-Europe‒1 (AAE ‒ 1) submarine optical cable as an example to examine the impact of international submarine optical cable construction on China’s cross-border M&A from a bilateral information flow perspective. Using SDC cross-border M&A data from 2009 to 2021 and the difference-in-differences (DID) technique, it finds that the opening of the AAE ‒ 1 submarine optical cable significantly boosts crossborder M&A by Chinese firms in directly connected countries. The mechanism analysis reveals that the AAE‒1 submarine cable facilitates the cross-border economic activities of firms by increasing bilateral information flows between China and the respective countries. It is also observed that the promoting effect of submarine optical cables is stronger in countries with poorer initial digital infrastructure and greater network freedom, and that it mainly facilitates mergers and acquisitions in high-technology industries.Besides, the AAE‒1 submarine cable has a strong spillover effect, which can lead to crossborder M&A in countries bordering the landing points.In conclusion, China-led construction of digital infrastructure can bridge the digital divide and promote China’s high-tech go global.

Key words: cross-border M&A, information asymmetry, submarine optical cables

JEL codes: F21, G34, D80