The Impact Of Economic Policy Uncertainty On China's Export

The government influences the micro-enterprises by adjusting or formulating policies in order to influence the macroeconomic development.When the relations among various countries are becoming increasingly close,the economic fluctuations caused by such policy changes will be transmitted to the trading partners through various channels.In recent years,the global economic turmoil has caused the global economy staying in a sensitive fragile period.Since the U.S.subprime mortgage crisis,started in 2008,the global economy is still at a slow pace,in the stage of economic recession,the government needs to afford less political costs of changing existing economic policies.Enterprises expect that the uncertainty of economic policies will obviously increase.This will not only affect the enthusiasm of domestic enterprises in investment and production but also form a signal of waiting and seeing for foreign enterprises,a series of domestic and foreign investment will be suppressed then.Changes in economic policy will inhibit the investment of enterprises,and the second-moment effect of the uncertainty will result in the problem of "over-reaction to trade".Therefore,how to better develop export trade in the post-crisis period has become the eternal issue of the world economy.As the largest export country in the world,China has been far ahead in terms of trade volume,but terms of trade have been declining and trade gains have been gradually declining.What behind the "impoverished growth" is the extensive margin contributing to the growth of China's export growth,which fully exposed the vulnerability of China's export growth to financial shocks.Uncertainty about the future economy will not only amplify the negative effects of economic shocks,but will also significantly hinder the economic recovery.As the microscopic subject of international trade and investment,enterprises pay more attention to the trend of the international economic situation.According to the real-option theory,the investment opportunities of enterprises can be regarded as call options,when the uncertainty of economy policy in the destination country increases,the value of the investment option increases so that the value of waiting for a return is greater,and the enterprise may choose to wait for investment or entry later,or simply give up the market.In fact,enterprises who entering into new markets or exporting new products or making new investments will take full account of the uncertainty of economic policies in the market of destination countries,because the process of entry will involve a large amount of irreversible investment and sunk costs,the enterprises who pursue profit maximization will weigh pros and cons before making a decision.When the uncertainty of the market economy policy of the destination country increases,the enterprise may choose to wait for the time of investment or entry or abandon the market directly.Under the framework of heterogeneous enterprise theory,only the most efficient enterprises will choose to export,low productive enterprises can only sell domestically or withdraw from the market.When the external market situation is not clear,in addition to the less-efficient firms,some of the more efficient firms that could otherwise be exported also halt investment in the consideration of sunk costs or irreversible investments,the decline in the number of enterprises entering foreign markets directly leads to the decline in the export volume and the extensive margin.As the exit of the marginal enterprises making a lower competitive intensity in foreign markets,it indirectly leads to export growth of the existing enterprises,namely intensive margin growth.How to find a way out for rebirth in the context of the uncertain economic situation and the phenomenon of "impoverished growth" in the future will be an important issue for the future development of chinese exporters.In view of this,this article uses the detailed HS6 product data of CEPII BACI from 1992 to 2002 and the uncertainty of economic policy index to measure the impact of the uncertainty of the economic policy of the destination country on the binary margins of China's exports.The empirical results show that the uncertainty of the economic policy of the destination country will significantly inhibit the growth of China's export extensive margin,but also significantly promote the growth of intensive margin.Further sub-sample found that the extensive margin of high-tech products will not be suppressed by the uncertainty of the economic policy of the destination country,but rather will be relatively increased,while the extensive margin of non-differentiated products will be restrained;however,the economic policy uncertainty of developed economies will restrain the extensive margin of China more when compared the developing economies.;the uncertainty of the economic policy has increased a lot after the crisis attack,which has a more profound effect on the extensive margin.At the same time,the thesis further controls the expected demand of the destination country in order to divest the second-order impact on China's exports.Finally,this paper verifies that the uncertainty of the economic policy of the destination country has an impact on the extensive margin through export fixed cost,and has an impact on the intensive margin through variable cost,which is consistent with the theoretical model.