Withdrawal symptom: foreign shareholding reduction and concentrated supply chains in China

This article investigates the effect of foreign shareholding reduction on supply chain concentration. Using data on Chinese listed firms from 2010 to 2020, we find that foreign shareholding reductions lead firms to concentrate their procurement and sales on major suppliers and customers. This effect is more pronounced among private firms, firms highly exposed to international trade, and firms less perceptive of economic policy uncertainty. We show that the effect is transmitted through two key channels: the dwindling commitment to R&D that erodes firm competitiveness while deepening reliance on low-cost sourcing, and the elevated information opacity that complicates inter-firm trust, which motivates strategic consolidations of supply chain partnerships.