Abstract
Chinese property law plays a significant role in the reforms of the Chinese economic system by establishing protective legal frameworks. This study utilizes the enactment of the Property Law in 2007 as a quasi-natural experiment and employs the difference-in-differences method to investigate the law’s impact on firm exports in China. The results indicate that firms’ exports experienced a significant increase after the law’s enactment. These findings remain robust after controlling for additional fixed effects, alternative subsamples, and measures of core variables. The law affects firm exports through two mechanisms: informal financial channels, such as trade credit with trading partners, and formal financial channels, such as borrowings from banks and other financial institutions. Heterogeneity analyses suggest that the export effect is positively related to firms that rely heavily on external financing and are not politically connected. Moreover, this correlation is accentuated in regions characterized by more conservative credit development and heightened efficiency in law enforcement. In addition, the promotional effect is more pronounced in firms exporting to high-income countries. These findings suggest that property rights protection in China significantly impacts trade and provides a comparative advantage to firms’ exports.
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes
1 The customs code has been adjusted three times (2002, 2007, and 2012, respectively) during the study period. To prevent the same commodity from being classified differently in different years, we first change the HS 8-digit codes into HS1996 codes at the HS 6-digit level, and then aggregate them at the ISIC 3-digit level.
2 The encoding conversion is available at https://wits.worldbank.org/product_concordance.html.
3 We estimate total factor productivity (TFP) as in Ackerberg, Caves, and Frazer (2015).
4 The control variables in this study are all in the current year, as control variables are easier to adjust in the current year than tangible assets.
5 Following Ding, Fan, and Lin (Citation2018), if one member of the firm’s board of directors holds government positions, such as being a Chinese People’s Political Consultative Conference (CPPCC) member or deputy to the People’s Congress, the firm is a PC Firm and is a non-PC Firm otherwise.
6 Enforcement days refer to the number of days it takes to execute the contracts in the province. The World Bank conducted a survey in 2006 and published its “Doing Business in China” report. A section of this report, “Enforcement of Contracts,” summarizes the average time it takes for the local judicial department to resolve legally protected commercial disputes.