The Effect Of Service Trade Liberalization On China’s Manufacturing Firm’s Productivity

The booming manufacturing sectors have brought the rapid growth of China.As China’s economy enters a new stage of development,with the comparative advantage based on demographic dividend and excessive exploitation of natural resources declining,to enhance China’s economic vitality,it’s crucial for manufacturing sectors to realize industrial transformation and upgrading driven by innovation.As a key area in future openness,service sectors are expected to lead high-quality economic growth in China.Under the background of fast development in service trade in China,this paper employs the rich variation in exposure to service trade liberalization of different firms and tries to find the internal correlation between service trade liberalization and manufacturing firm productivity.On the basis of literature review,further empirical tests are made to explore the possible mechanisms between them and more efforts are made to test the heterogeneity of such effect.The following conclusions have been drawn.First,China’s service trade has been expanding magnificently and the trade cost decline significantly improved domestic manufacturing enterprise productivity.Second,the positive effect is mainly from the producer service trade while the non-producer service trade openness exerts an opposite influence.Moreover,the effect is stronger for manufacturing firms in the central and western area.Furthermore,the effect is weakened among state-owned enterprises and China’s Exports-Productivity Paradox stands.Last,three main influence mechanisms are empirically demonstrated:financial constraint channel,technology spillover channel and cost efficiency channel while producer service liberalization and non-producer service liberalization show different performance.Related suggestions are put forward.First,encourage further openness in service sectors and foster the innovation-driven development of service trade.Second,promote financial market reform and expedite the construction of multi-level capital market to provide stronger financial support for innovation activities of manufacturing firms.Third,provide policy guidance and enhance the competitiveness of nonproducer service sectors.Forth,accelerate service trade development in the central and western area.Moreover,activate the potential of state-owned enterprises by introducing the market mechanism.Last,encourage the export of high-quality products and upgrade the trade structure.