The Collateral Damage of US Export Control Regulations on Japanese Suppliers’ Exports to China

This study empirically examines the impact of the US government’s tightening of export control regulations on China’s telecommunications equipment company, Huawei Technologies Co., Ltd. (hereinafter, Huawei), on Japanese supplier firms’ exports to China. We identify the major Japanese suppliers of Huawei and apply the difference-in-differences method to firm-level data from 2016 to 2021. The results indicate that, compared with other Japanese firms in the same industry, Huawei’s supplier firms reduced their exports to China in 2020, just after Huawei was added to the US Entity List in 2019. By contrast, Huawei suppliers increased exports to their affiliates and non-affiliated firms in other Asian economies in 2021 and expanded domestic sales in 2020 and 2021. These responses were particularly strong among R&D-intensive suppliers, suggesting that they precautionarily diversified their customer base away from China toward less-risky destinations, including domestic and neighboring Asian markets, in response to heightened uncertainty surrounding US export control policies.