The Tide Has Turned

EU Firm-level Productivity Growth has Started to Suffer from Chinese Import Competition

Chinese export dominance is no longer confined to low-wage sectors. Chinese firms are now in direct competition with firms in advanced economies, even in domestic markets. Previous research indicated that increasing exposure to imports from China had positive effects on the productivity of European firms, unlike their US counterparts. This column provides evidence of a change: since 2010, a "China shock" has begun hitting European firms, negatively affecting their productivity growth. The authors find that the effect is muted for high-growth multinationals, and suggest a series of possible policy responses.