Does trade facilitation contribute to export product quality upgrading in China?

This study investigates the effect of trade facilitation in export destination countries on the export product quality of Chinese firms. As a key factor in the rapid development of China's foreign trade, it is still unclear whether trade facilitation has helped to upgrade the quality of firm export products. This study fills this gap by constructing a theoretical framework of the endogenous quality selection model. Using export trade data from the China Customs database from 2007 to 2015, we find a significant U-shaped relationship between trade facilitation and export product quality. When the degree of trade facilitation is low, the low-price substitution effect causes the quality of export products to decrease as the level of trade facilitation increases. When the degree of trade facilitation is high, the income feedback effect promotes the quality of export products to increase as the level of trade facilitation increases. This result is confirmed across different income countries and technology products, highlighting the importance of trade facilitation affecting the quality of export products through the low-price substitution effect and the income feedback effect.