Government Credit and Trade War

Topic:

Government Credit and Trade War

Time&Date: 

 13:00-14:15 pm, 2019/10/11 (Friday)

Venue:

  Room 619, Teaching A

Speaker:

Dr. Ru Hong (Nanyang Technology University)

Using transaction-level trade data from China Customs and loan data from the China Development Bank (CDB), we analyze how government credit affects trade activities. CDB credit to strategic industries at the top of supply chains leads to lower prices, higher volumes, and more product varieties and destinations of exports for firms in downstream industries. This increased import competition crowds out U.S. firms in the same industry but crowds in downstream firms. In recent trade war, U.S. government strategically raised tariffs on China’s imports that compete with domestic manufacturers rather than the imports that are used as inputs for U.S. firms.