The impact of import competition from China on firm‐level productivity growth in the European Union*

Abstract

AbstractWe re‐examined the impact of rising imports from China on intra‐firm productivity growth in the European Union during the period 2005–16. In contrast to previous studies, we found that an increasing share of Chinese imports in total imports has slowed productivity growth over the observation period. This unfolded especially after the 2008/09 financial crisis and was more pronounced for firms with lower productivity growth. On average, the net effect of China's increasing import intensity on productivity growth has been negative for firms in the European Union since 2010. At the beginning of the sample, firms growing at the median rate experienced a modest growth‐enhancing effect of 0.02 percentage points, which turned slightly negative at −0.06 percentage points in the last observation year. The effect was muted for high‐growth multinational firms, which experienced a productivity growth premium from Chinese import competition at higher growth rates. Compared with the United States, the negative impact of Chinese import competition on the performance of EU firms is visible with a time lag.