Abstract
This paper applies a difference-in-differences framework to explore the economic consequences of the recent U.S.–China trade war. The average abnormal returns of Chinese listed firms during a period centered on President Trump's announcement on 22 March 2018 are taken as a proxy for the firms' exposure to the potential trade war. Firms more negatively exposed are found, surprisingly, to report higher total revenues in the post-announcement period. The results indicate that the Chinese firms tend to reallocate their business from overseas to the domestic market. Such within-firm reallocation is found to be more pronounced among private firms, exporting firms and non-FDI firms. Besides, firms with higher negative exposure increase total investment and financing but decrease foreign investment after the trade war.
| Original language | English |
|---|---|
| Pages (from-to) | 3907-3932 |
| Number of pages | 26 |
| Journal | World Economy |
| Volume | 45 |
| Issue number | 12 |
| Early online date | 21 Jun 2022 |
| DOIs | |
| Publication status | Published - Dec 2022 |
Bibliographical note
Funding Information:This work was supported by the National Natural Science Foundation of China [Nos. 72173082 and 71703086]; the Fundamental Research Funds for the Central Universities [Nos. 2021ECNU‐HLYT033 and 2021QKT009]. The authors would like to thank the editor and the two anonymous referees for helpful comments and suggestions. Authors are listed in alphabetical order. All remaining errors are our own.
Publisher Copyright:
© 2022 John Wiley & Sons Ltd.
Keywords
- abnormal returns
- China
- overseas revenue
- reallocation
- trade wars