An empirical study of how Chinese firms respond to the Sino-US trade war

Abstract

The outbreak and ongoing escalation of the Sino-US trade war have had a systemic impact on the business environment for Chinese companies, drawing widespread attention from both academia and industry to their response strategies. This study uses Chinese A-share listed firms from 2013 to 2022 as samples. Through three sub-studies, it systematically examines how Chinese companies respond to the trade war from three angles: supply chain resilience, outward foreign direct investment (OFDI), and innovation, revealing the adjustment patterns of their micro-behaviors in response to external policy shocks.
The first study examines supply chain resilience and analyzes how the Sino-US trade war affects the resilience of enterprises' supply chains, as well as its moderating effect on their innovation capabilities. Using a difference-in-differences (DID) model, the research finds that the Sino-US trade war has significantly decreased the supply chain resilience of companies exposed to risk, indicated by a broad decline across dimensions such as resistance and recovery capacity. Enterprises’ innovation abilities have effectively mitigated this shock through channels such as expanding overseas markets and strengthening domestic competitiveness. This mitigating effect is more pronounced in non-state-owned enterprises, those without political connections, and technology-intensive companies.
The second study examines the driving force behind OFDI in companies during the Sino-US trade war, focusing on the influence of entrepreneurship spirit. Results show that companies facing trade friction risks significantly increase OFDI to avoid tariffs, which can boost their market value and innovation capability. Entrepreneurship as a spirit, such as regional entrepreneurial culture and the entrepreneurial traditions of the chairman's hometown, promotes OFDI through three channels: increasing innovation output, easing financing constraints, and improving governance. This effect is stronger in regions with better business environments, in low-technology-intensive firms, and in those with a high share of fixed assets.
The third study uses the time-varying DID model to examine the effect of the US Entity List on corporate innovation and industry peer effects. The results indicate that the Entity List has significantly increased R&D investments by companies within their industries, with government subsidies serving as a mediating factor. Private enterprises exhibit a stronger innovation response than state-owned enterprises, and the governance structure that combines two positions negatively moderates this relationship. The robustness test confirms the reliability of the findings.
The three studies collectively establish a framework for Chinese enterprises facing the Sino-US trade war. Theoretically, this study expands the policy shock perspective within supply chain resilience theory, enriches the crisis response mechanisms of OFDI theory, and deepens understanding of innovation incentive theory amid technological blockades. Practically, it provides tailored recommendations for companies on developing supply chain management, foreign investment, and innovation strategies, as well as references for the government to enhance the policy system in response to trade tensions.

Date of Award	19 Jul 2026
Original language	English
Awarding Institution	University of Nottingham
Supervisor	Xiuping Hua (Supervisor) & Shuai Yuan (Supervisor)