SME performance and the US-China trade war: Evidence of China

33 Pages Posted: 16 Jan 2021

See all articles by Feng Liu

Feng Liu

Shandong University

Zhangxin Frank Liu

The University of Western Australia Business School

Grant Fleming

Continuity Capital Partners

Date Written: October 31, 2020

Abstract

This paper examines the impact of the US-China trade war on the operating performance of Chinese export-oriented SMEs with US customer concentration. Using a unique dataset derived from textual analysis and company information from the New Third Board Market, we employ matched pairs analysis to compare the abnormal performance of export-oriented SMEs before and after the introduction of tariffs, controlling for performance, industry and size. We find that tariff changes did not negatively impact the operating performance of Chinese export-oriented SMEs, as compared with domestic matched firms. In general, returns on assets, return on sales and sales growth were higher after the introduction of tariffs, although we find that the first year of tariffs negatively impacted operating performance for SME firms the higher their level of American customer concentration. Our findings suggest that export oriented Chinese SMEs are resilient to changes in tariffs, effectively managing customer concentration and have operating flexibility to hedge against adverse changes rules which regulate the flow of goods through global supply chains.

Keywords: US–China trade war, Supply chain management, Major customers, Firm profitability, Sales growth, SMEs

JEL Classification: F13, F23

Suggested Citation

Liu, Feng and Liu, Zhangxin (Frank) and Fleming, Grant Alan, SME performance and the US-China trade war: Evidence of China (October 31, 2020). Available at SSRN: https://ssrn.com/abstract=3722539 or http://dx.doi.org/10.2139/ssrn.3722539

Feng Liu

Shandong University ( email )

Businees School
Weihai
China

Zhangxin (Frank) Liu (Contact Author)

The University of Western Australia Business School ( email )

School of Business
35 Stirling Highway
Crawley, Western Australia 6009
Australia

Grant Alan Fleming

Continuity Capital Partners ( email )

GPO Box 314
Canberra, Australian Capital Territory 2601
Australia

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