We present the first comprehensive set of firm-level total factor productivity estimates for China's manufacturing sector that spans her entry into WTO. We find that productivity growth is among the highest compared to other countries. For our preferred estimate, the weighted average annual productivity growth for incumbents is 2.7% for a gross output production function and 7.7% for a value added production function over the period [1998][1999][2000][2001][2002][2003][2004][2005][2006]. Of the various sensitivity checks we carry out, controlling for the increase in labor quality and labor hours, as proxied by the rising real wage, has the largest (downward) effect on the productivity estimates. We further document that new entrants are a particularly dynamic force and that firms experience large productivity declines before exiting from the sample. Overall, net entry contributes roughly half to total TFP growth. Aggregate productivity growth, however, is tempered by a much lower effect of reallocation of inputs towards higher productivity firms, compared to the U.S. benchmark.

We examine the effects of trade liberalization in China on the evolution of markups and productivity of manufacturing firms. Although these dimensions of performance cannot be separately identified when firm output is measured by revenue, detailed price deflators make it possible to estimate the average effect of tariff reductions on both. Several novel findings emerge. First, cuts in output tariffs reduce markups, but raise productivity. Second, pro-competitive effects are most important among incumbents, while efficiency gains dominate for new entrants. Third, cuts in input tariffs raise both markups and productivity. We highlight mechanisms that explain these findings in the Chinese context. (JEL D24, F13, L25, L60, O14, P31, P33)

We present the first comprehensive set of firm-level total factor productivity estimates for China's manufacturing sector that spans her entry into WTO. We find that productivity growth is among the highest compared to other countries. For our preferred estimate, the weighted average annual productivity growth for incumbents is 2.7% for a gross output production function and 7.7% for a value added production function over the period [1998][1999][2000][2001][2002][2003][2004][2005][2006]. Of the various sensitivity checks we carry out, controlling for the increase in labor quality and labor hours, as proxied by the rising real wage, has the largest (downward) effect on the productivity estimates. We further document that new entrants are a particularly dynamic force and that firms experience large productivity declines before exiting from the sample. Overall, net entry contributes roughly half to total TFP growth. Aggregate productivity growth, however, is tempered by a much lower effect of reallocation of inputs towards higher productivity firms, compared to the U.S. benchmark.

Over the reform period, industry has been the source of 40% of GDP, and has contributed 90% of China\u27s exports. Annual firm-level surveys that begin in 1992, complemented with industry-wide census in 1995, 2004 and 2008, are rich sources of data on firm behavior. It is well-known that working with Chinese data requires overcoming difficult measurement issues. Macroeconomic series, for example, are often suspected of suffering from reporting bias and political interference. Working with the firm-level data has its own challenges. In this paper, we provide an introduction to these data sets. We discuss and illustrate several of the issues that make comparability over time difficult and suggest solutions. The importance of a particular measurement issue often depends on the exact application. We illustrate this point by tracing the evolution of the relative productivity level of entrants and incumbents over time, distinguishing between changes in actual performance and changes driven by measurement problems. We conclude by identifying a few promising areas of future research and margins on which collaboration among users to improve these data might be beneficial

This article studies how real exchange rate movements affect firm export behavior, using monthly data that cover the universe of Chinese export transactions over the period of 2000-2006. Specifically, we examine exchange rate effects on an exporter's extensive (entry, exit, and product churning) and intensive margins of exports. We find significant effects on the extensive margin. A 10% real appreciation of the renminbi is associated with a 1 percentage point decline in the probability of entry, and a 0.2 percentage point increase in the probability of exit. The effects among foreign-invested enterprises almost double for both entry and exit. Despite the seemingly large effect on the extensive margins, exchange rates alone can only explain about 4% of entries and about 1.6% of exits during the sample period. The exchange-rate elasticity of exports is estimated to be around 0.4 in the first year after the shock, with most of the adjustment taking place in the first six months. This finding of a relatively fast response to exchange rate shocks is consistent with anecdotal evidence about intense competition in the Chinese export sectors.