China-ASEAN Free Trade Agreement and Chinese Enterprise Productivity

This paper examines the impact of tariff reduction policies in the CAFTA on the Chinese industrial enterprises TFP. This paper finds that the tariff reduction policy of CAFTA makes it easier for low-productivity enterprises to exit, and high-productivity non-export enterprises to enter the export market. The current export enterprises expand export sales, thus reallocating resources within the industry and improving the overall productivity level of the industry. We also find that the policy has a positive impact on patent adoption, as lower trade costs lead to higher revenues, which is an important mechanism for productivity growth at the firm level.