The impact of regional trade policy uncertainty on the productivity of Chinese export enterprises: The case of China–ASEAN Free Trade Area

Kexuan Zhou, Linhui Yu, Xinlin Jiang and Sanjay Kumar

Pacific Economic Review, 2023, vol. 28, issue 2, 218-240

Abstract: Reduction of regional trade policy uncertainty is critical for promoting Chinese export enterprise productivity and will help the economy enter the high‐quality development stage. We use the case of the China–ASEAN Free Trade Area to empirically tests the impact of the reduction of regional trade policy uncertainty on the productivity of Chinese export enterprises. We apply the difference‐in‐difference method to micro‐enterprise level data from the “China industrial enterprise database” and “China Customs enterprise database” for 2007–2013. Our analysis and results show that establishing the China–ASEAN Free Trade Area has dramatically reduced regional trade policy uncertainty, significantly impacting the productivity of Chinese enterprises exporting to ASEAN. The results also show that enterprises with different ownership types, regions, factor density, and pollution emission intensity show significant heterogeneity in the level of productivity improvement. Applying a mechanism test, we found that the promotion of productivity from a reduction of regional trade policy uncertainty is achieved through the learning effect, the competition effect, and improving the trade environment of imported intermediate goods. The learning effect mechanism has the highest contribution, accounting for 39.01% of the net effect. The empirical results provide novel insight into promoting the productivity of Chinese enterprises exporting to ASEAN from the perspective of reducing regional trade policy uncertainty.

Date: 2023
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