Has COVID-19 Changed China's Digital Trade?-Implications for Health Economics

Abstract

Digital technologies have played a significant role in the defense against the COVID-19 pandemic. This development raises the question of whether digital technologies have helped Chinese exports recover quickly and even grow. To answer this question, we study monthly data on Chinese exports to 40 countries/regions from January 2019 to June 2020 and covering 97 product categories. The study takes the COVID-19 outbreak as a natural experiment and treats digital trade products as the treatment group. Using a generalized difference-in-differences (DID) approach, we empirically investigate how this major global public health crisis and digital trade have influenced Chinese exports. Our empirical analysis reveals that the COVID-19 pandemic has inhibited China's export trade overall, digital trade has significantly promoted trade, and the supply mechanism has played a significant role in promoting the recovery of exports. Heterogeneity tests on destination countries/regions reveal that digital trade has significantly promoted exports to countries/regions with different income levels, with a more significant effect on low-risk destinations than on high-risk destinations. The sector heterogeneity test demonstrates that digital trade has enhanced the export recovery of sectors dealing in necessities for pandemic prevention. Other robustness tests, including parallel trend and placebo tests, support the above conclusions. Finally, we extend the research conclusions and discuss their implication for health economics and the practice of fighting COVID-19.

Keywords: COVID-19; Chinese exports; digital trade; generalized difference-in-differences; natural experiments.