Does Sino-US trade friction hurt corporate resilience? Evidence from Chinese enterprises

Abstract

As the world’s largest foreign trading country, China has faced numerous trade investigations in recent years. We select panel data from China’s manufacturing A-share listed companies from 2012 to 2021 to explore the impact of Sino-US trade friction on corporate resilience and its internal mechanisms. The results show that: (1) The intensification of Sino-US trade friction significantly reduces the resilience of Chinese microenterprises. This conclusion remains robust after a series of tests using PSM-DID and other methods. (2) Heterogeneity analysis shows that the resilience of export enterprises, high-tech enterprises, and enterprises in developed regions are more severely impacted by Sino-US trade friction. (3) Mechanism tests reveal that Sino-US trade friction damages enterprise resilience mainly through three channels: damaging the spirit of entrepreneurs, reducing internal operating profits, and exacerbating external financing constraints. The results provide theoretical and empirical support for understanding the survival effects of microeconomic entities under the impact of Sino-US trade friction.

KEYWORDS:

• Sino-US trade friction
• corporate resilience
• entrepreneurship
• PSM-DID

JEL Classification:

• F742

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 According to the data released by the State Administration for Industry and Commerce of China in the ‘Analysis Report on the Survival Time of Domestic Enterprises Nationwide’, among the 13.2254 million observed enterprises, nearly half have a survival period of less than 5 years. This contrasts significantly with the findings of a survey by Japan’s ‘Nikkei Sangyo’, where the average lifespan of Japanese enterprises is approximately 30 years. Additionally, there is a substantial difference compared to the average lifespan of around 40 years for European and American enterprises.

2 The term ‘VUCA’ stands for Volatility, Uncertainty, Complexity, and Ambiguity. In economic terms, it refers to an era characterized by unpredictability, where conditions are constantly changing and difficult to interpret.

3 Referencing the ‘ZTE incident’ and the ‘Huawei incident’: In 2018, the US Department of Commerce accused ZTE of violating a settlement agreement, prohibiting US companies from selling crucial technology and components to ZTE. In the same year, the US government, through a defense authorization bill, prohibited federal agencies from using Huawei equipment. Additionally, the US government urged its allied countries to restrict or ban the use of Huawei equipment. Against the backdrop of escalating Sino-US trade friction, the United States imposed trade sanctions on Huawei, demanding that it cease the use of US components and technology in certain critical technology areas.

4 Industry classification is based on the 2012 revised ‘Guidelines for Industry Classification of Listed Companies’ by the China Securities Regulatory Commission (CSRC).

5 The arithmetic mean method is employed to convert monthly data into annual data, and missing values are replaced by the annual import quantity index of the manufacturing industry for the respective year.

6 The dataset comprises 12,244 sample observations. However, subsequent analyses of robustness, heterogeneity and mechanisms, the introduction and replacement of variables led to inconsistencies in the amount of observed data.

7 Due to space constraints, the results of the placebo test for randomly designated policy times and the experimental group and other details are provided in the appendix.

8 During the sample observation period, the number of antidumping and countervailing cases remained relatively stable each year, while the number of safeguard cases was too low. To avoid excessive loss of information, this paper uses the number of antidumping cases and the number of safeguard cases as a substitute for the total number of AD, CVD, and SM cases to measure the degree of Sino-U.S. trade friction. Consistent with the baseline, considering lag effects, the logarithm of the number of antidumping cases plus one in the t-1 year against China’s manufacturing sub-industry j is chosen as a measure.

9 High-tech manufacturing includes the following industries: manufacturing of chemical raw materials and chemical products, pharmaceutical manufacturing, chemical fiber manufacturing, general equipment manufacturing, special equipment manufacturing, transportation equipment manufacturing, electrical machinery and equipment manufacturing, and communication equipment, computer, and other electronic equipment manufacturing.

10 Due to space constraints, regression results are presented in the appendix.

11 The eastern region includes 13 provinces: Hebei, Beijing, Tianjin, Shandong, Shanghai, Jiangsu, Zhejiang, Fujian, Guangdong, Hainan, Liaoning, Jilin, and Heilongjiang. The central and western regions include 18 provinces: Shanxi, Henan, Anhui, Hubei, Hunan, Jiangxi, Inner Mongolia, Guangxi, Shaanxi, Gansu, Ningxia, Qinghai, Xinjiang, Chongqing, Sichuan, Guizhou, Yunnan, and Tibet.

12 In addition, according to the mediating effect test method proposed by Wen and Ye (2014), we test the mediating effect of the influencing mechanism of entrepreneurship, operating profit, and financial constraints on corporate resilience. The estimated results all effectively support the above theoretical analysis results. We report the relevant estimated results in the appendix to save space.

13 In order to conveniently display the regression results and the coefficient representation, the unit of enterprise operating profit is 10 million.

Additional information

Funding

This study is sponsored by the Beijing University of Civil Engineering and Architecture Post Graduate Innovation Project (Grant No. PG2024153).