FDI,Export Sophistication,and Quality Upgrading: Evidence from China's WTO Accession |
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Institution: | 1. The Research Institute of Economy, Trade and Industry, 1-3-1, Kasumigaseki, Chiyoda-ku, Tokyo 100–8901, Japan;2. Faculty of Political Science and Economics, Waseda University, 1-6-1 Nishiwaseda Shinjuku-ku, Tokyo 169–8050, Japan;1. School of Business/Advanced Institute of Finance, Sun Yat-Sen University, Guangzhou, China;2. Institute of Industrial Economics, Jinan University, Guangzhou, China;3. ETH Zurich, CEPR, CESifo, Switzerland |
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Abstract: | This paper identifies a positive effect of FDI liberalization on manufacturing export sophistication, exploiting China’s adjustment of its Catalogue for the Guidance of Foreign Investment Industries upon its accession to WTO. It further investigates the underlying causes in the lines of firm ownership type, trade mode, product type, and intensive vs. extensive margins. The positive effect comes from, e.g., the increase in the export share of foreign-invested enterprises (FIEs) and firms with processing trade, and the increase in the export sophistication of privately-owned enterprises (POEs), of ordinary trade, and of intermediate goods. The intensive margin rather than extensive margin is accountable for the effect. Liberalizing FDI does not seem to have any significant effect on product quality. |
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Keywords: | FDI deregulation Export sophistication China |
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