A Race to Lead: How Chinese Government Interventions Shape U.S.-China Production Competition
70 Pages Posted: 15 Apr 2020 Last revised: 15 Mar 2022
Date Written: March 14, 2022
Integrating establishment-level data from the United States and China, we study dynamic industrial interdependence between the two economies. Births of Chinese firms predict same-industry firm exits and reduced employment in the U.S., but the reverse relationship is not significant. Chinese Five-Year Plans were not preceded by low production/employment in the same industries in the U.S. but were followed by shrinkage with spillovers along the supply chain. Stock returns, firm valuation, and job postings indicate that neither the market nor companies expected deterioration in the targeted industries prior to the announcement of the Plans, but made adjustments afterwards.
Keywords: Investment policy, employment, subsidies, industrial policy
JEL Classification: F14, F16, O25, L60
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