Uncertainty, GVC participation and the export of Chinese firms

Abstract

AbstractIncreasing uncertainty has hindered the development of international trade in recent years. Participating in the global value chain (GVC) has become one way for Chinese export firms to deal with uncertainty and reduce external risks. Based on trade theory with heterogeneous firms, this study constructs a theoretical framework encompassing uncertainty and GVC participation. We find that uncertainty inhibits the export of firms, but GVC participation can alleviate the negative impact of uncertainty, which is verified through empirical analysis. Additionally, mechanism analysis reveals that GVC participation plays a moderating role through product diversity, market diversity, cost‐saving effects, and quality‐improving effects. This study demonstrates that in the absence of serious adverse events, GVC is highly efficient. Accordingly, China should actively participate in the governance of the COVID‐19 pandemic, reduce the external uncertainty faced by Chinese export firms, promote the return of an efficient GVC, and further ameliorate the negative impact of uncertainty.