How Do U.S. Firms Withstand Foreign Industrial Policies?

Xiao Cen, Vyacheslav Fos and Wei Jiang

No 32411, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: China’s industrial policies (“Five-Year Plans”) displace U.S. production/employment and heighten plant closures in the same industries as those targeted by the policies in China. The impact was not anticipated by the stock market, but U.S. companies in the "treated industries" suffer a valuation loss afterwards. Firms shift production to upstream or downstream industries benefiting from the boost, or offshore to government-endorsed industries in China. Such within-firm adjustments offset the direct impact. U.S. firms are better able to withstand foreign government interventions provided that they enjoy flexibility, including preexisting business toeholds in the "beneficiary" industries, financial access, and labor fluidity.

JEL-codes: G3 G30 G31 G38 (search for similar items in EconPapers)
Date: 2024-05
New Economics Papers: this item is included in nep-cna and nep-int
Note: CF
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