China & World Economy / 102–127, Vol. 30, No. 5, 2022
Firms Quasi-dynamics in Chinese Manufacturing Industry
Lixing Li, Qihong Liu, Changyu Ren
Abstract
We explore firm quasi-dynamics (entry, exit, and growth) in Chinese manufacturing industry and investigate how these dynamics vary across regions. Our results show that relative to provinces with less developed economies, in provinces with more developed economies (i) there is a higher proportion of new firms; (ii) new firms are smaller and more labor-intensive; (iii) firms exit at a quicker rate, and surviving firms grow faster. These results point toward cross-region differences in market efficiency in terms of how much it costs a firm to enter or exit the market. Our findings shed light on how firms should adapt their strategies across regions and how the government should create sound policies on industrial upgrading and relocation.