PUBLICATIONS & REPORTS

Contents Introduction

This paper uses a unique plant-level panel dataset from the Chinese manufacturing sector to measure the effects of foreign firms on the productivity of domestic firms. We find that foreign firms are more productive than domestic firms in the same industry. We find little evidence that foreign firms had any effect, either positive or negative, on the average productivity of domestic Chinese manufacturing plants. However, we also find clear evidence that this average effect masks important heterogeneity: large domestic firms appear to benefit significantly from the presence of foreign firms in the sector, while the productivity of small domestic firms is lowered by the presence of foreign firms.