Trade Scopes across Destinations: Evidence from Chinese Firm

Abstract We examine how Chinese exporters adjust their number of exported varieties with respect to different characteristics of destination countries and varying trade cost. Using the Chinese firm-level customs data from the years 2001 and 2006, we show that: (i) firms export fewer varieties (indexed by HS6 code) to the destinations which are with higher exchange rate volatility, farther from China, or impose higher import-tariff rate; (ii) in response to the tariff reduction process by the destination countries after China entering to the WTO in 2001, the high productivity firms expanded the export scope while the low productivity firms reduced it.With a theoretical framework which considers firms' optimization decision involving both production and export varieties, we explain all our empirical findings, highlighting the relation between the exchange rate volatility and the number of export varieties