Import Competition from China and Markup Dispersion

Author Name HAYAKAWA Kazunobu (Institute of Developing Economies) / URATA Shujiro (Faculty Fellow, RIETI) / YAMANOUCHI Kenta (Kagawa University)
Creation Date/NO. April 2022 22-E-031
Research Project Globalization and the Japanese Economy: Firm Adjustment and Global Trade Governance
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In this study, we explore the impacts of import competition from China on Japan's manufacturing industry. Specifically, we focus on the effects on markup dispersion from the perspective of resource allocation. We first show that the markups and prices of the plants in Japan are negatively affected by the import competition from China. The negative effect is specific to the imports from China and not observed for the import competition from other countries. Second, we found that while non-Chinese import competition reduces the markup dispersion, Chinese import competition has no effects on the dispersion of the markups. The import competition from China is relatively stronger for relatively low-markup plants and forces them to lower their markups further. While consumers can enjoy the lower markups or prices, allocation efficiency may not be improved by the import competition from China.