Zhang Junmei | Climate Change and Export Trade: Firm - level Evidence from China
Recently, the Center for International Finance and Economics Research (CIFER) of the National Institute of Financial Research at Tsinghua University hosted...Academic Symposium on "2022 International Trade Disputes and the Restructuring of Globalization"The event was successfully held. Assistant Researcher, Global Zhejiang Business Development Research Institute, Zhejiang University of TechnologyZhang JunmeiAttendDepend onCIFER Part-time Researcher、Assistant Professor, School of Economics, Central University of Finance and EconomicsZhang JialiangHostPandemic, Economic Uncertainty and Geographic EconomicsSub-forum 8Sharing with collaborators on the topic《Climate Change and Export Trade: Corporate Evidence from China》(Climate Change and Exports: Firm-Level Evidence from China）The article.
Zhang JunmeiShe received her Ph.D. in International Trade from Nankai University in 2021, earning a PhD in Economics.I work at the Global Zhejiang Business Development Research Institute of Zhejiang University of Technology as an assistant researcher.
Zhang Junmei
This article analyzes Chinese meteorological and export data to explore whether Chinese export enterprises will be suppressed by the physical impact of temperature changes against the backdrop of intensifying climate change.
In recent decades, China’s rapid industrialization has exacerbated carbon emissions and accelerated global warming.China Climate Change Blue Book (The 2020 report indicates that China is a significant and sensitive area to global climate change. From 1951 to 2019, the rate of increase in China's average annual temperature was significantly higher than the global average during the same period. Since the mid-1990s, extreme heat events in China have increased significantly, and climate disasters have become more frequent. In 2018, climate change caused significant working time losses globally, and multiple heatstroke incidents in China drew public attention, with heat waves affecting over 900 million people. The 18th National Congress of the Communist Party of China identified addressing climate change as a crucial lever for ecological civilization construction and achieving high-quality development, focusing on improving the climate adaptability of the entire society. Exports, as one of the "three drivers" of China's economy, accounted for over 30% of China's GDP in some years. Although exports have fluctuated upwards, the growth rate has declined, resulting in insufficient contribution to GDP growth.
Based on the above facts and background, this article proposes the following research questions: 1. Does temperature shock constrain the growth of enterprise exports? If so, what are the pathways through which it affects exports? 2. From an export perspective, do different types of enterprises and different types of cities exhibit heterogeneous sensitivity to climate change?3. What are the impacts of catastrophic climate shocks on corporate exports? 4. Estimate the extent of the impact of future climate change on corporate exports and the vulnerability of different regions.
The article proposes that temperature shocks primarily affect exports through productivity disruption effects and dynamic adjustments in firm exports. Based on this mechanism, the authors propose four hypotheses: First, temperature shocks (deviations from optimal temperatures) negatively impact firm exports, exhibiting an inverted U-shaped relationship between temperature and exports; second, temperature shocks constrain export development mainly by affecting the productivity of exporting firms (including total factor productivity, labor productivity, and capital productivity); third, under temperature shocks, exporting firms tend to shift towards domestic sales; and fourth, temperature shocks tend to reduce the expansion and intensive margins of firms' exports.
The historical climate data used in this article comes from daily meteorological data (2000-2016) from the National Meteorological Information Center, and the future climate data comes from the Sixth Coupled Model Intercomparison Project (CMIP6) (2030-2100). Enterprise data from the China Customs Database (2000-2016) and the China Industrial Enterprise Database (2000-2013) were used for baseline regression and mechanism testing, respectively.
The baseline regression, employing parametric and semi-parametric regression methods, validated the inverted U-shaped relationship between climate and exports. Mechanism testing revealed that high-temperature shocks significantly impact total factor productivity, low-temperature shocks significantly impact labor productivity, and the impact of temperature shocks on capital productivity exhibits an inverted U-shaped relationship. Furthermore, low temperatures significantly reduce the probability of firms exporting, and the impact of temperature on the dual margins of exported products (including intensive and extended margins) also shows an inverted U-shaped relationship.
The article then conducts a heterogeneity analysis based on factors such as whether intermediate goods are imported, different ownership structures, and different urban climate adaptability. The results show that private enterprises and those without intermediate goods imports are more sensitive to temperature shocks; historically cold cities have shown some adaptability to low-temperature shocks, while historically hot cities have not adapted to high-temperature shocks.
The first extended study of the article concerns the impact of catastrophic climate shocks on firm exports. Using the 2008 snowstorm in China as an example, regression analysis was conducted with the seven most severely affected provinces as the treatment group and the remaining provinces as the control group. The regression results show that the snowstorm significantly reduced the export scale of private enterprises and SMEs, but had no significant impact on the exports of foreign-invested enterprises, state-owned enterprises, and large enterprises. The second extended study estimates the impact of future climate change. The study found that future climate change will have a significant negative impact on firm exports; the greater the warming, the greater the negative impact of temperature changes on exports. In the medium term…When the temperature is controlled atWhen temperatures rise below 2°C, China's exports will decrease by approximately $125 billion annually, representing 1.1% of its 2016 GDP. Temperatures exceeding 4°C will cause an average annual export decrease of $698 billion, representing 6.2% of 2016 GDP. Furthermore, in the future, the less developed the city, the greater the negative impact on enterprise exports.
The authors summarized the article's two contributions: first, the main study used parametric and semi-parametric regression methods to examine the impact of temperature conflicts on firms' export behavior; second, the extended study used event study methods to examine the impact of catastrophic climate shocks on firms' export behavior and estimated the impact of future climate change on exports based on forecast data.
Zhang Zhiqiang
Postdoctoral Fellow, School of Economics, Fudan UniversityZhang ZhiqiangThis was affirmed as a well-structured study, including parametric regression, semi-parametric regression model analysis, heterogeneity analysis, and robustness analysis. Professor Zhang offered three suggestions: First, the definition of "climate shock" should be more clearly defined, considering not only average temperature but also temperature variations and fluctuations. Second, while the model controlled for a range of climate variables, it did not control for socioeconomic variables at the urban level, potentially leading to variable bias. Finally, the estimation of future climate change impacts in the extended study requires further consideration. It should also take into account the impact of temperature shocks on other countries, which could potentially affect the comparative advantage of Chinese enterprises in import and export trade; therefore, this extension warrants further discussion.