Trade Liberalization,Financing Constraint And China's Foreign Trade Transformation And Upgrading

Since the opening up and reform policy,China stands in the world with an averaged annual growth rate of nearly 10%.During the process of China's rapid economic growth,foreign trade has played a key role.It is important to recognize that China is still located in the low end of the global value chain,enterprise productivity and export product quality is still low,the sustainable development of foreign trade is becoming increasingly prominent,and the comprehensive transformation and upgrading China's foreign trade is still a long way to go.Existing research on China's foreign trade transformation and upgrading mainly focuse on analyzing China's export performance,lacking studies from the perspective of trade liberalization and financing constraints.Based on the economic facts of China's foreign trade imbalance,this paper takes enterprise productivity,global value chain position,export expansion of enterprises and the quality of export products as core indicators for foreign trade transformation and upgrading,and examines micro-mechanisms and effects of trade liberalization and financing constraints on China's foreign trade transforming by constructing an analytical framework of China's foreign trade.This paper focuses on the key issue:In the context of global value chain,how do trade liberalization and financing constraints affect China's foreign trade transformation and upgrading?In order to answer these questions,this paper constructs an analytical framework of trade liberalization and financing constraints on the transformation and upgrading of China's foreign trade based on export characteristics,productivity,global value chain and export product quality.It mainly focuses on the endogenous mechanisms of how financing constraints would affect moving up decision in the global value chain of Chinese enterprises and empirically assesses the effcts of trade liberalization and financing constraints on China's foreign trade transformation and upgrading.The main conclusions are as follows:In terms of the effect of trade liberalization,this paper first analyzes the determinants of China's trade imbalance.We find that before the accession to WTO,the appreciation of RMB exchange rate has no significant effect on China's value-added trade surplus.After joining WTO,the effect of RMB is significant.Similarly,before joining the WTO,the effect of total amount of FDI in China on China's value-added trade surplus is not significant,but is siginificant after the accession to the WTO.FDI from US and Asian four tigers can significantly increase China's value-added trade surplus,while FDI from Japan and Germany will reduce it.Then the paper applys PNTR as a quasi-natural experiment and DDD estimation method to show that PNTR significantly increases China's export value and quantity to the United States,while reducing export prices,suggesting that PNTR mainly affect China's export scale and don't promote the product quality of Cina's export;The significant impact of PNTR on China's export value and quantity both exist in ordinary trade and processing trade,however,the impact on export prices only exist in ordinary trade;PNTR mainly affects the growth of export scale of private enterprises and foreign invested enterprises with no significant effect on state-owned enterprises.On the contrary,PNTR will lead to the deterioration of export prices of state-owned enterprises,while have no significant effect on export prices of private enterprises and foreign invested enterprises;PNTR significantly improves productivity of foreign invested enterprises having no significant effect on state-owned enterprises and private enterprises in which export growth is an important path PNTR act on productivity growth.In terms of the impact of financing constraints on transformation and upgrading of trade,the paper first introduces processing mode of pure assembly and import assemble into the theoretical model.The position of the global value chain is measured by the ratio of import assembly and firm level domestic value added.We test the effects of financing constraint on global value chain upgrading.The results show that more productive firms tend to engage in higher stages of the global value chain e.g.import assembly,less productive firms are engaged in lower stages of GVCs e.g.pure assembly;Moving up the global value chain incur higher capital investment,therefore firms with smaller financing constraints and higher productivity are more likely to climb up in global value chains and these two measures binding together can play a more important role.Secondly,from the perspective of financing constraints,we discuss the impact of clustering trade credit on export expansion and export product quality improvement.We find that clustering trade credit can alleviate firm's financing constraints,significantly improving export participation probability and export level.The results show that the clustering trade credit mainly affects exports of private enterprises and enterprises in the eastern region,and the impact on processing export is not significant.We utilize the unit price method and the demand residual method to measure the quality of export products.The clustering trade credit can significantly improve the quality of export products.In order to better identify the effect,we control the clustering degree of a county or city and construct a quasi-natural experiment according to whether the enterprise changes the operating site.Above results are robust.Policy implications are as follows.Firstly,China's export expansion is still driven mainly by the growth of export quantity,quality improvement needs to be strengthened more and the differences in the growth of export volume and quality among different ownerships should be paied attention to;Secondly,promoting firm's productivity and providing external financial support for firms help fims move up along the global value chain and these two measures generate mutual promoted effects;Thirdly,clustering trade credit not only affects the level of firm exports,but also shapes firm's export decisions which can explain the fact that the private sector in China has achieved a great success in export market although more difficulty in gaining formal credit.As an important complement to bank credit,developing clustering trade credit is an effective way to promote China's foreign trade transformation and upgrading.