The positive impact of Sino-US trade friction on total factor productivity – Evidence from Chinese ICT firms

This paper uses data from Chinese ICT-listed firms from 2012 to 2022 and employs a difference-in-differences model to empirically examine the impact of the Sino-US trade friction on firm total factor productivity (TFP). The study finds that the trade friction has a significantly positive effect on the TFP of Chinese ICT firms, and this conclusion remains robust after a series of robustness checks. The mechanism analysis reveals that forcing ICT firms to increase R&D investment and improve management efficiency is the path mechanism to improve TFP. The firm heterogeneity analysis shows that the productivity-enhancing effect of the trade friction is more pronounced in non-state-owned firms and firms participating in strategic alliances. The regional heterogeneity analysis indicates that this positive effect is more evident in firms located in regions with a culture of business cooperation and in the eastern regions of China. This research provides new empirical evidence of the trade friction and offers strategic insights for policy makers to mitigate trade-related uncertainties during Sino-US trade friction.