Import Competition with China. Implications for Firms' Productivity Growth in the EU

Klaus Friesenbichler; Werner Hölzl; Agnes Kügler

14.04.2021

Import Competition with China

Implications for Firms' Productivity Growth in the EU

The massive increase in imports from China reflects the country's emergence as a global player. A recent article of the WIFO-Monatsberichte (monthly reports) by Klaus S. Friesenbichler, Werner Hölzl, Agnes Kügler and Andreas Reinstaller analyses the impact on productivity growth using an extensive dataset of firms in the EU.

Since China's WTO accession, Chinese imports have gained dramatically in importance in Europe. Especially since the financial market and economic crisis of 2008-09, imports from China have increased, in particular in the high-tech sector. China has therefore become a high-tech exporter.

An empirical study funded by the Anniversary Fund of the Oesterreichische Nationalbank (OeNB) shows that the increase in import intensity with China dampened the average productivity growth of firms in the EU. However, not all firms are equally affected. While multinational companies benefited from trade with China, especially companies in the low-tech sector and in Southern Europe suffered from import competition. European trade policy should adapt to the changed challenges and create a level playing field.