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China’s value-added tax reform and quality upgrading of export products

SHENG Dan1 YANG Huimei1

(1.School of Economics, Nankai University, Tianjin, China 300071)

【Abstract】At this stage, China’s economy has shifted from a high-speed growth stage to a high-quality development stage. We must adhere to quality first, promote quality changes in economic development, accelerate the construction of a manufacturing power, and promote the construction of a trade power. Against this background, improving the quality of export products, cultivating new advantages in export competition, and realizing the conversion of export products from low-price competition to quality competition have become a problem that must be considered at present. Based on the perspective of supply-side structural reforms, this paper took the deepening of the value-added tax (VAT) reform as the starting point, and systematically analyzed the internal relationship between the VAT reform and the quality of export products. Then, using the quasi-natural experiment of China’s 2004 VAT reform in the northeast area and the data of China’s annual survey of industrial firms and import and export trade from 2000 to 2007, this paper investigated the impact of the VAT reform on the quality of export products through the method of difference-in-differences (DID) based on a comprehensive description of the evolution characteristics of quality of China’s export products. The results showed that first, the VAT reform has a significantly positive effect on export product quality and is conducive to the quality upgrading of export products. After considering a series of robustness tests, the conclusion is still valid. Second, the mechanism analyses and tests show that the innovation performance of firms and the quality of imported intermediate products are the main channels through which the VAT reform affects the quality of export products. Finally, the heterogeneity analyses show that the effect of the VAT reform on the quality of export products varies depending on R&D intensity, factor intensity and the form of ownership. Specifically, the effect is more obvious in low-R&D intensive firms, labor-intensive firms and non-state-owned firms. Based on the above findings, the main implications of this paper could be concluded as follows. First, the tax reduction policy has a positive effect on the improvement of quality of export products, and the appropriate expansion of the coverage of preferential tax policies is optional. Second, the government should make full use of the tax reduction policy’s guidance and motivation to stimulate firms’ investment and speed up technological upgrading, and take the improvement of innovation performance and quality of imported intermediate products as important paths for improving firms’ quality of export products. Furthermore, the formulation of tax policies should be more targeted and structured, and firms with weak R&D foundations, low technological levels and more constraints should be focused on.

【Keywords】 VAT reform; quality of export products; innovation performance; quality of imported intermediate products;


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CN: 31-1012/F

Vol 46, No. 06, Pages 79-93

June 2020


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