Chinese Exporters and the Asian Financial Crisis

This paper analyzes firm panel data to examine how export demand shocks associated with the 1997 Asian financial crisis affected Chinese exporters. We construct firm-specific exchange rate shocks based on the pre-crisis destinations of firms ’ exports. Because the shocks were unanticipated and large in magnitude, they are an ideal instrument for identifying the impact of exporting on firm productivity and other performance measures. For the period 1995 to 1998, we estimate an elasticity of Chinese exports with respect to a foreign trading partner’s real exchange rate of-0.48. Exporting is found to significantly boost a firm’s total factor productivity, net value added per worker, total sales, and return on assets