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

Global Supply Chain Disruption and Restructuring under Trade Policy Shocks

DING Haoyuan, DONG Wenjuan and YU Xinding

Summary: With increasing international economic and policy uncertainties as well as the resurgence of trade protectionism, frequent adiustments and sudden shifts in trade policies pose significant challenges to the stability of global supplchains. Thus, accurately assessing the risks and impacts of trade policy shocks on Chinese enterprises within the global supply chain network and identifying response strategies and specific measures taken by micro-entities are crucial for understanding and navigating the ongoing transformation of global supply chains. It also carries significant policy implications and practical relevance for clarifying China's strategic direction and response measures in the context of accelerating global supply chain restructuring.

Based on that, our study takes the U.S. tariff hikes on imported Chinese products starting in March 2018 as a representative case of trade policy changes. By using the FactSet Revere database, we identify and track supply chain relationships between Chinese listed companies and overseas customers, empirically examining the dynamic patterns of supply chain disruption and restructuring under trade policy shocks.

Our study finds that (1) trade policy shocks significantly affect the continuity of supply chains. Following the U.stariff hikes, the probability of supply chain disruption between Chinese firms and the U.S. partners increases significanthdue to the substantial rise in tariff costs. Also, we explore the key factors influencing supply chain resilience, which re.veals that supply chain resilience is notably stronger with lower product substitutability, higher contractual costs. and slonger cooperation relationship between suppliers and their overseas customers. (2) We also focus on patterns of supphchain restructuring under trade policy shocks. On the one hand., once supply chains are disrupted. it is dificult to recovein the short term. On the other hand, new cooperation networks rapidly form as old supply chains break, leading to a shifin supply chain relationships. Specifically, companies tend to re-establish supply chain relationships near-shore and do.mestically, as well as in other developed areas of Europe and America outside the United States. Accordingly, firms adjusheir industrial scope. The success rate of supply chain restructuring depends on more transparent and timely informationas well as a diversified product-market structure.

The contributions of our study are as follows. (1) The existing research on the economic impacts of trade policrshocks primarilv focuses on macroeconomic effects or the overall impact on firms, with little discussion about the supplchain relationship between firms. We provide a new empirical perspective by examining the inter-firm supply chan relationships at the micro level. (2) Regarding the issue of supply chain disruption and restructuring under external shocksprevious literature has mainly focused on discussing the impact of external shocks such as natural disasters, public healtcrises, and socio-political conflicts, while the impact of trade policy shocks and their micro-mechanisms still require further study. We focus on trade policy changes, a specific external shock less addressed in this strand of literature, and fur.ther reveal the roles of increased trade costs and trade policy uncertainties. (3) By considering the dynamic changes fromoverseas supply chain disruption to restructuring, we comprehensively capture the dynamic patterns of firms’ crossborder strategic adiustments under external shocks.

According to the above findings, we propose corresponding policy recommendations for the government from fouaspects: strengthen global strategic planning and policy coordination to enhance the competitiveness of Chinese enterprises in the global market, promote institutional opening up to align domestic market rules with international standards thereby reducing institutional transaction costs, increase support for digital empowerment of enterprises to improve theieficiency in overseas information search and market response, and keep advancing the construction of a unified nationamarket to break down regional barriers within the domestic market and enhance the linkage effects between domestic andinternational markets. In the increasingly complex global economic landscape, these measures can help to enhance therisk resistance of Chinese enterprises within global supply chains and strengthen the overall economic security and autonomy.

Keywords: Supply Chain Resilience, Supply Chain Restructuring, Trade Policy Shocks, Uncertainty

JEL Classification: F13.F23.14

China Economic Quarterly

Foreign Direct Investment and China's Industrial Structure Upgrading: Comparative Advantage Transition Perspective

LI Zhiyuan, Zhao Yonghan

Abstract: We use customs data to calculate China's comparative advantage transition patterns. Combining prefecture-level statistics and registration information of industrial and commercial enterprises, we identify the effect of foreign direct investment (FDl) on comparative advantage transition. We find that from 2000 to 2009, China's comparative advantage transition degree steadily increased, accompanied by evident heterogeneity across regions. Comparative advantage transition can reflect the optimization and upgrading of domestic industrial structure, and the leap in quality of economic development, FDI significantly promotes the comparative advantage transition by bringing about external knowledge shocks and fostering adjustments in the input structure among firms.

Keywords: comparative advantage transition; industrial structure upgrading; foreign direct investment.

JEL Classification:F21，010，033

Carry-Along Exporters in China: Measurement and Explanation

CHEN Yongbin, CHEN Xianmeng, WANG Beibei, LI Kai

Abstract: We systematically analyze the characteristics of carry-along exporters in China and explainstheir determinants for the first time, using a matched database combing China Industry Product Output Data and China Customs Data. On average, carry-along exporters are prevalent, accounting for 65.25 % of the number of exporters and 31.73% of the export sales. Our analysis suggests that domestic institutional barriers are not the main cause of carry-along trade, Instead, the intention to save on export costs also counts as one of the primary forces shaping carry-along trade, apart from the motivation of demand complementarity among products.

Keywords: trade intermediation by producers: carry-along trade: demand complementarity

JEL Classification:F10，F13，024

The Positive Effects of Emission Rights Trading Policy on the Quality of Firm's Export Products

PENG Shuijun, WU Lamei, WANG Jin, ZHANG Liang

Abstract: We construct a quasinatural-experiment according to the emission rights trading policy toidentify the effects of market-based policy instruments on the quality of firms’ export products, and find significant positive effects. The mechanism results show that the policy has increased firms’ fixed costs related to pollution abatement. As a response to the increased compliance costs, firms will increase R&D and innovation to improve productivity. Multi-product firms will focus on highquality products and clean transportation, thus promoting the quality. The heterogeneity analysis shows that the effects aresignificant for domestic firms, and firms in regions with high environmental law enforcement.

Keywords: emission rights trading policy;export product quality; production conversion.

JEL Classification:F10，F12，F18

The Journal of World Economy

From Investment through Business Connections to Responsible Investment: Chinese Overseas Mergers and Acquisitions amid Negative Environmental Media Coverage

Chen Sichong, Wang Ziyu, Yu Minggui

Abstract: As companies incorporate environmental, social and governance factors into their investment decisions, Chinese overseas investments are transitioning from a traditional investment driven approach through a business connections model to a new paradigm of responsible investment. This paper takes Chinese overseas mergers and acquisitions (M&A) events between 2009 and 2022 as the subject of study and research, examining the legitimacy-shaping of Chinese companies’overseas investments against a background of negative environmental media coverage, and comparing distinct investment roles through business connections and responsible investment in response to negative media coverage. The study shows that negative environmental media coverage, especially from international sources, significantly decreases the success rate of Chinese companies’overseas M&A. Compared to investment made through business connections, Chinese companies’responsible green investment inareas such as emissions reduction exhibits higher success rates even against a background of negative media coverage. The mechanism analysis indicates that responsible green investment can reduce the likelihood of intervention by regulatory agencies in the host country and enhance corporate reputation thereby elevating the success rate of M&A. The document essentially reveals that Chinese responsible overseas inyestment not only contributes to the ioint construction of a new, cleaner and more beautiful world, but also presents new opportunities to address the ongoing issue of negative media coverage that has plagued Chinese companies.

Key words: investment through business connections, responsible investment, negative environmental media coverage, overseas mergers and acquisitions (M&A), Chinese companies

JEL codes: F21,F23,G34

Export Shocks, Counter-cyclical Adjustment and Debt Issuance Behavior of Local Governments

Nie Zhuo, Li Lixing, Ma Guangrong, Hei Ye

Abstract: Using a sample of Chinese prefecture-level cities from 2007 to 2019, this paper examines how local governments make counter-cyclical adjustments through debt expansion in response to negative export shocks, employing changes in global demand as a source of exogeneous variation inthe construction of a shift-share IV, Prior to the implementation of the new 2015 budget law, localgovernment financing vehicles (LGF Vs) significantly increased debt issuance in the face of a slowdownin local exports. This led to an increase in infrastructure investment and partly offset the negative impact of declining external demand, at the cost of increased financial risk, After the implementation of the newbudget law, LGFV debt was subject to strict regulation, so it ceased to respond to shocks in external demand. Meanwhile, due to quota constraints, the local explicit debt did not respond either. The impact of export shocks on local economic growth became stronger, while financial risks were also partially eased. This study contributes to the understanding of the role of local government debt in macroeconomic regulation and provides policy references for a sound public debt management systemand a macroeconomic governance system.

Key words: local government debt, export shocks, counter-cyclical adjustment, economic stability

JEL codes: H74, F14,E62

Indireet Digital Transformation, Supply Chain Spillover and Corporate Export Trade

Jin Xiangyi; Zhang Wenfei

Abstract: The application of digital technology is the central driving force behind the development of export trade. The combination of supply chain production and digital technology implementation provides indirect digital transformation opportunities for firms that may find this hard to achieve, having a profound impact on their export trade. In this context, this paper combines Chinese customs data and corporate supply chain data to conduct an in-depth analysis of the relationship between firms’ indirect digital transformation and exports in the supply chain. The findings of the study indicate that indirect digital transformation can increase the export scale of firms and optimise their export binary margin. Testing of the mechanism reveals that the enhancement effect on search matching, the improvement effect on supply chain efficiency, and the innovation-promoting effect on knowledge are important channels through which indirect digital transformation promotes corporate export growth. A closer analysis illustrates that the trade growth effect caused by the spillover of supply chain technology presents an obvious phenomenon of internal and external transmission in the chain, which further promotes the development of corporate export trade. The deepening of the supply chain production mode is a realistic promotion path aimed at facilitating the integrated development of foreign trade with the support of the national production cycle.

Key words: indirect digital transformation, supply chain production relations, technology spillover, corporate export, digital technology

JEL codes: F10,F14,014