Trade Liberalisation and Chinese Firm's Exports: Sourcing from Indonesia

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About the Journal

The World Economy, first published on 22 October 2020, https://doi.org/10.1111/twec.13058

Author

• Lili Yan Ing, Economic Research Institute for ASEAN and East Asia, Jakarta, Indonesia
• Wei Tian, School of Economics, Peking University, Peking, China
• Miaojie Yu, National School of Development, Peking University, Peking, China

Abstract

We investigate how trade liberalisation affects the performance of Chinese manufacturing firms via sourcing from the South. Taking imports from Indonesia, the largest country in South‐east Asia—China's current trading partner as an example, we find that Chinese firms with higher import shares from Indonesia perform better in productivity, exports and sales, and they are more likely to engage in processing exports. Moreover, the impacts of foreign trade liberalisation on China's export scopes are more pronounced for firms with larger import shares from Indonesia. Such findings are robust to different empirical specifications.