How did international trade, FDI and privatization affect productivity of Chinese manufacturing companies? An empirical study based on firm-level data

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We conducted firm-level survey in China's steel, apparel and automotive industries with Chinese scholars. Using this data we estimated determinants of TFP level and TFP growth among these firms. We found that the TFP level and TFP growth of Chinese firms are strongly affected by ownership patterns.We also analyzed the degree and the current status of localization of Japanese affiliates in China. For this purpose, we (1) compare the localization (measured in terms of the number of expatriates, local sales, local procurement, and local management) of Japanese and U.S. affiliates in China and other major regions; (2) analyze the impact of localization on the profitability of Japanese affiliates in China and in other major regions; and (3) conduct a detailed investigation of inter-firm transactional relationships in China between automobile manufacturers and parts suppliers. We find that compared with U.S. affiliates, Japanese affiliates tend to be less localized. Using a comprehensive affiliate-level panel data set on Japanese multinationals and concentrating on China, we then examine the effect of localization quantitatively and find that Japanese affiliates with higher procurement ratios and/or local CEOs and procurement managers enjoyed high profits.