The Growth of Chinese Exports: New Market Entry

Over the period of 1995-2005 an increasing number of differentiated products have been exported from developing countries. For example, while Chinese products had exported to 40.5% more markets on average, the corresponding numbers for Japan and the United States were almost constant. Using the bilateral trade data of 128 countries from 144 products, we study the determinants of China’s success in market access at the product level. We estimate a Probit model based on the heterogeneous-firm model at the product level for each year and find strong evidence that China’s success in accessing foreign markets is due to productivity growth of industries, probably engendered by firm level technological advance of existing firms or entry of foreign firms that have begun to produce in and export from China.