Liberalization for services FDI and export quality: Evidence from China

•We examine the effect of services FDI liberalization on exporting firms’ quality.•We employ firm-level export data in China.•We also examine other kinds of trade policies.•Easing of services’ restrictiveness resulted in raising export product quality.•The quality upgrading is found mainly for forei...

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Bibliographic Details
Published in:Journal of the Japanese and international economies 2020-03, Vol.55, p.101060, Article 101060
Main Authors: Hayakawa, Kazunobu, Mukunoki, Hiroshi, Yang, Chih-hai
Format: Article
Language:English
Subjects:
China
Services
Tariffs
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Summary:•We examine the effect of services FDI liberalization on exporting firms’ quality.•We employ firm-level export data in China.•We also examine other kinds of trade policies.•Easing of services’ restrictiveness resulted in raising export product quality.•The quality upgrading is found mainly for foreign-owned enterprises. By employing firm-level export data in China, this paper empirically examines the effect of liberalization of services foreign direct investment (FDI) on exporting firms’ quality upgrading. To evaluate its relative effectiveness, we also examine other kinds of trade policies, including tariffs in export destination countries and input and output tariffs in China. With China's accession to the World Trade Organization in December 2001, these trade policies changed substantially during our sample period of 2000–06. Empirical results showed that easing the restrictiveness of services FDI resulted in raising export product quality, mainly for foreign-owned enterprises. More than any other trade policy, we found that reduced input tariffs contributed to raising export product quality.
ISSN:0889-1583
1095-8681
DOI:10.1016/j.jjie.2019.101060