A Race to Lead: How Chinese Government Interventions Shape the U.S.-China Production Competition

60 Pages Posted: 15 Apr 2020 Last revised: 26 May 2021

See all articles by Xiao Cen

Xiao Cen

Mays Business School, Texas A&M University

Vyacheslav Fos

Boston College - Department of Finance; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Wei Jiang

Columbia Business School - Finance and Economics; ECGI; NBER

Date Written: May 25, 2021

Abstract

Using U.S. and China establishment-level data, this paper studies the dynamic interdependence in industrial activities between the U.S. and China. In a VAR framework, high birth rates of Chinese firms predict same-industry firm exits and lowered employment in the U.S., particularly in the export-intensive industries. Moreover, high industry subsidy from the Chinese government is followed by a decrease in the number of establishments and employment in the corresponding U.S. industries, although these subsidies are not motivated by existent deterioration in investment opportunities in the targeted industries in the developed world. China's Five-year Plans offer a tight causal inference as shocks to China's industry growth. These shocks were not preceded by low productivity or valuation in the same industries in the U.S. but were followed by shrinkage of establishments and employment in these industries.

Keywords: Production Competition, Industrial Policy, Trade War

JEL Classification: F14, F16, O25, L60

Suggested Citation

Cen, Xiao and Fos, Vyacheslav and Jiang, Wei, A Race to Lead: How Chinese Government Interventions Shape the U.S.-China Production Competition (May 25, 2021). Available at SSRN: https://ssrn.com/abstract=3564494 or http://dx.doi.org/10.2139/ssrn.3564494

Xiao Cen (Contact Author)

Mays Business School, Texas A&M University ( email )

430 Wehner
College Station, TX 77843-4218
United States

Vyacheslav Fos

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Wei Jiang

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States
(212) 854-5553 (Phone)

ECGI ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

NBER ( email )

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Cambridge, MA 02138
United States

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