Technology Blockade and Diversification of Markets:Based on the Trade Networks
Preventing foreign trade risks has become a severe challenge for countries and diversifying markets plays a crucial role in responding to external shocks.The United States has implemented stringent export controls through a series of entity lists since 2018,resulting in a technology blockade for China's Information and Communications Technology(ICT)products.This has led to a sharp increase in the import costs of ICT intermediate inputs.Meanwhile,the disruption of exports from upstream manufacturers has created opportunities for the development of ICT products in China.Therefore,it is crucial to explore whether China's ICT products seize this opportunity to diversify its markets based on the trade networks.The technology blockade not only directly impacts the sanctioned firms but also continues to spread along differentiated trade network relationships.Specifically,as foreign manufacturers discontinue the supply of critical intermediates,domestic products have the chance to fill market gaps.Measuring this market effect is of great significance for addressing external risks in the future.Therefore,this paper focuses on distinguishing between the cost and market effects of the technology blockade.The cost effect refers to the direct negative impact of supply chain disruptions,while the market effect refers to the positive effects resulting from increased regional demand,R&D incentives,and incentives for independent production.This paper accomplishes three main objectives.Firstly,it provides a theoretical framework based on Antras et al.(2024),and delves into the dual impacts of technology blockade.Secondly,it employs the shift-share analysis to clarify the mechanisms of the cost effect and market effect,providing causal inference support.This paper finds that the expansion of market demand prompts firms to invest more resources in establishing sales channels.Meanwhile,a market where supply falls short of demand incentivizes firms to allocate more resources to research and independent production.Additionally,domestic market segmentation inhibits the market effect.Thirdly,this paper conducts a multi-dimensional analysis of the market effect and cost effect.Using the Visual Geometry Group(VGG)network model,this paper finds that the domestic trade network significantly amplifies the market effect.Moreover,the market effect has a long-term impact and has a positive effect on ICT products'position in the global value chain(GVC).Meanwhile,it finds that Asian markets play a crucial role in mitigating the cost effect.This paper contributes to existing literature in three aspects.The first lies in the research perspective.Rather than assessing the negative impacts of the technology blockade,this paper focuses more on the resilience of China's ICT products.Empirically,it examines how China's ICT products seized market opportunities from 2016 to 2022.Theoretically,based on the characteristics of technology blockade,theoretical models are constructed to explore the specific mechanisms.It provides reference suggestions for developing economies on how to form an independent development path.Moreover,it is of great significance for reducing risks of industrial insecurity and instability.The second contribution is the detailed exploration of the research content.This paper theoretically and empirically distinguishes the characteristics of the market effect and cost effect.Additionally,utilizing the VGG model from the field of machine learning,this paper provides solid data support for research on technology blockade.The third contribution is the in-depth exploration of the research mechanisms.Examining network structures,this paper provides policy recommendations for the practical constraints faced by Chinese ICT products.It finds that the expansion of market demand and the enhancement of incentives for research,as well as independent production,are crucial to overcoming practical constraints.Moreover,domestic market segmentation and the scarcity of import channels are key factors driving the formation of the cost effect.This paper provides valuable insights on how to break the practical constraints hindering the diversified development of China's ICT product export markets.
technology blockadetrade networkdiversification of markets
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