The puzzle of quality upgrading of Chinese exports from the trade liberalization perspective

Xianhai Huang, Kun Liu and Hangyu Chen

Pacific Economic Review, 2020, vol. 25, issue 2, 161-184

Abstract: Trade liberalization could accelerate the process of quality upgrading through the competition effect. However, that the quality of Chinese exports exhibits an opposite performance pattern is puzzling. The present paper uses a framework based on multiproduct firms to analyse the mechanism of how the product quality of exports is affected by trade liberalization to explain this puzzle. The model includes two major mechanisms: the competition effect and the market effect. There is a huge gap in the influence on the product quality of exports between a decrease in tariff barriers and non‐tariff barriers: firms' product quality increases (decreases) when non‐tariff barriers (tariff barriers) fall. The data of Chinese firms from 2001 to 2011 supports this conclusion. Further research reveals that the influence of trade liberalization on the product quality of exports in China varies among different types of firms.

Date: 2020
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