This paper examines the impact of service liberalization on the transformation of Chinese export modes from the micro perspective. First, we introduce service liberalization into the heterogeneous firm trade model with different trade modes, and theoretically proves that service liberalization could reduce the production cost of ordinary trade, then promoting the transformation of export mode and finally realizing the upgrading of Chinese export structure. Second, based on the matching firm-level data of Chinese Industrial Enterprises Statistics Database and Chinese Customs Trade Statistics Database from 2001 to 2011, the empirical results shows that the transformation of export mode is significantly affected by service liberalization, which is basically consistent with the theoretical hypotheses. Specifically, service liberalization has significantly increased the proportion of ordinary trade in total exports of firms and promoted the transformation of processing-trade firms into ordinary-trade firms, which is robust to various estimates. Such effects are more pronounced for producer services liberalization, non-SOE firms, firms in the eastern regions and service-intensive firms. These conclusions have important policy implications for China to expand the opening-up of services and promote the high-quality development of trade. 

Fu Dahai, Lu Chenghao

School of International Trade and Economics, Central University of Finance and Economics, Beijing 100081, China

“Service Liberalization Promotes Transformation of Trade Modes —Firm-level Theory and Evidence from China” China Industrial Economics 2021(7) 

Link: http://ciejournal.ajcass.org/