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U.S.–China trade war and corporate reallocation: Evidence from Chinese listed companies

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  • Haoyuan Ding
  • Kees G. Koedijk
  • Tong Qi
  • Yanqing Shen

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.

Suggested Citation

  • Haoyuan Ding & Kees G. Koedijk & Tong Qi & Yanqing Shen, 2022. "U.S.–China trade war and corporate reallocation: Evidence from Chinese listed companies," The World Economy, Wiley Blackwell, vol. 45(12), pages 3907-3932, December.
    • Handle: RePEc:bla:worlde:v:45:y:2022:i:12:p:3907-3932
    DOI: 10.1111/twec.13308
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    2. Xu, Yang & Huang, Wei & Zhang, Cherry Yi, 2024. "Navigating international competition with ESG: Insights from the US-China trade war," Research in International Business and Finance, Elsevier, vol. 70(PB).

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