Services Liberalization and Export Quality: Evidence from China

Abstract

Using firm-level export data from China, this paper empirically examines the effect of domestic liberalization of services on exporting firms’ quality upgrading. We examine a number of other trade policies, including: tariffs in export destination countries; and input- and output-tariffs in China. Following China’s accession to the World Trade Organization in December 2001, these trade policies changed substantially during our sample period of 2000 - 2006. Our findings suggest that, of all the policies, reduced input tariffs contributed the most to raising export product quality. Easing of services’ restrictiveness also resulted in improved export product quality, but mainly for foreign owned enterprises.