An Anatomy of Intermediaries in China’s Export Market

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Analyzing firm-level exports of China, especially those conducted by intermediaries, from 2000 to 2006 reveals a number of interesting findings. Regarding the role of intermediaries in China’s exports, we find the following: first, intermediaries became less important when China’s overall export grew. Second, intermediaries are more important for ordinary exports than for processing exports. Third, intermediaries are more important for relatively homogeneous products such as textiles and apparel than for differentiated products such as machinery. Fourth, intermediaries are concentrated in economically developed cities. However, intermediaries became less important for a particular city if that city’s GDP per capita grew. Fifth, intermediaries ship a smaller share of exports through Hong Kong than do manufacturing firms, indicating that intermediaries assumed some of the intermediating function of Hong Kong. For policy changes over this period that affected intermediaries, we find that: first, deregulation policies on setting up intermediaries induced a growing proportion of privately owned intermediaries among all intermediary exporters. Second, trade liberalization, characterized by trade policy uncertainty reduction due to World Trade Organization (WTO) accession, caused more entries into the export market by manufacturing firms than by intermediaries.