The nexus between product sophistication and export survival: Evidence from China

Abstract

This study investigates the survival of China's bilateral export flows at the six-digit HS level over the period 2002–2020. The results reveal that export relationships defined as product-destination pairs are highly dynamic and short-lived. Most export spells last no longer than five years, with a median duration of only two years. Product sophistication is a crucial determinant in establishing and stabilizing export relationships. This conclusion remains robust even after accounting for various measures for product sophistication, alternative definitions of export spells, and potential biases arising from simultaneity, sample selection, and data aggregation. Further analyses demonstrate that comparative advantage plays a positive role in moderating the nexus between product sophistication and export survival. In contrast, destination income poses a reverse U-shaped moderating effect on the relationship. The per capita income corresponding to the maximum moderating effect is US$ 6996.94, or the 56th percentile of the variable. Income distance accounts for the nonlinear effect of per capita destination income on export survival. These findings provide insights into China's rapid export growth and have significant implications for policymakers in China and other emerging economies striving for global trade success.