Study On Trade Openness And China’s Private Enterprises’ Survival And Development

After China’s successful accession to WTO, market access restrictions on private enterprises are gradually reduceing, private enterprises obtain the opportunity of rapid development. Through accepting the transfer of manufacturing industry from the developed countries, private enterprises have promoted the rapid growth of China’s export trade and addressed social employment issues. Now, private enterprises have become the major driving force of rapid growth of China’s economy. However, after the burst of the global economic crisis in2008, the reality of that a large number of small and medium private enterprises in China collapsed because of the external shock proved that China’s private enterprises are still facing many problems behind the prosperity, including that financing constraints has not yet been resolved, survival time is short, has not built national brand, export relys on cost advantage too much, the lack of domestic market-based. For this reason, based on the background of China’s private enterprise facing financing constraints, this paper researchs the influence of trade openness to the entry, survival time and excessive export of private enterprises.Firstly, based on three-digit manufacturing industry data, this paper studies the impact of trade openness and the other factors on China’s private enterprises entry through building pure entry rate to replace net entry rate many existed paper used. The empirical results show that:trade openness of sector reduces the barriers to entry of private enterprises and promotes the entry of private enterprises significantly. The positive relationship between private enterprises’ entry and sector’s profit rate is not significant indicates that the entry of private enterprise is not driven by profit and more likely to be affected by other factors; Loss rate and exit rate of state-owned enterprises have a significant role in promoting the entry of private enterprises. This can prove that substitution effect is the way that private enterprises choose to enter in the process of transition rather than error correction mechanism that many papers have been elaborated. Enterprise loss and excess capacity existing in the industry is the result of substitution effect, we can not get the conclusion that there is excessive entry. In addition, advertising density promotes the entry of private enterprises, research and development density can not prevent the entry of private enterprises effectively. Moreover, the coefficient of state-owned enterprises’ share in the industry which can measure the institutional barriers is significantly negative. This indicates that institutional barrier is still an important obstacle to private enterprises facing.Second, this paper studies the impact of trade openness to China’s private enterprises’ survival time. The results show that export can promote the survival time of private enterprises. Then, we split firms into export starters and continuous exporters and check if export can promote private enterprises survival time through improving export enterprises’ financial condition. We find that suck cost payment make starters more vulnerable. Continuous exporters are less vulnerable to financial constraints. In addition, according to the export intensity, we split export enterprises into three groups. We find the relationship between export intensity and the risk of exit of private enterprises is U-shaped. Low export intensity enterprises can send signal to financial institutions and relief the financial constraints. But high export intensity enterprises can not do that. No matter what kind export intensity enterprises are, export can improve enterprise’ productivity and enhance the enterprises’ survival time.We also find that horizontal effect brought by the entry of foreign enterprises increases the exit risk of private enterprises. But forward and backward linkage effect brought by the entry of foreign enterprises can enhance private enterprises survival time. Forward and backward linkage effect is larger than horizontal effect for high-tech and low export intensity private enterprises. So the entry of foreign enterprises enhances these two kinds of private enterprises’ survival time. Horizontal effect is larger than forward and backward linkage effect for low-skilled and high export intensity. So the entry of foreign enterprises increases the exit risk of these two kinds of private enterprises. Forward and backward linkage effect enhances private enterprises’survival time through improving productivity and alleviating external financing constraints. Horizontal effect can not enhance private enterprises’survival time through improving productivity, but increase the exit risk through increasing private enterprises’ demand to capital. Third, we try to explain the high speed export of private enterprises through builing a three-region and two-country model considering market segmentation, market size, financing constraints at the same time. Then we test our mathematical conclutions through empirical method. We prove that:under the existence of market segmentation, private enterprises have small living space and also need to pay the cost to enter the other domestic market. Trade openness provides an alternative to private enterprise. If the cost of entering the other domestic market is larger than the cost of entering international market, the private enterprises choose to enter the international market, and local governments will encourage private enterprises to exports in order to achieve economical development indicators. In the presence of severe market segmentation, private enterprises facing financing constraints will allocate more capital to explore international market and increase export. Empirical tests proved the conclusions derived from mathematical model. In this condition, we note that private enterprises’ export is not based on domestic market and more depends on external demand. Enterprises are not able to avoid risk through two markets. The foreign enterprises are not subject to the impact of market segmentation. The existence of market segmentation and financing constraints are not conducive to the transformation, upgrading and sustainable development of China’s private enterprises.