GEP 17/01: China's dual export sector

Abstract

China has transitioned from being an almost autarkic economy to become the world's largest exporter in less than three decades. Given this unique transformation, this paper investigates if the key stylized facts that characterize the behavior of firms' exports around the world, can also describe China's experience after joining the World Trade Organization. We find that, consistent with received wisdom, relatively few Chinese firms engage in exporting, and those doing so, are on average, larger and more productive than their domestic counterparts. However, unlike other large and developed countries, a substantial share of Chinese exporters sell the majority of their output abroad. In fact, the distribution of Chinese exporters according to their export intensity - the share of their revenues accounted for by exports - is strikingly bimodal.  In contrast to recent work that has focused on the technological factors that explain the prevalence of high-intensity exporters, we instead concentrate on the role played by China's heterodox trade policy regime in promoting pure exporters. Our empirical analysis suggests that trade policy has played an instrumental role in fostering a dual export sector. Notably, nine out of ten manufacturing exporters in China are eligible to enjoy fiscal incentives contingent on export performance.

Download the paper in PDF format

Authors

Fabrice Defever and Alejandro Riaño

View all GEP discussion papers | View all School of Economics featured discussion papers