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Crude Oil Price Fluctuation and the Performance of Chinese Manufacturing Firms
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TitleCrude Oil Price Fluctuation and the Performance of Chinese Manufacturing Firms  
AuthorCheng Dong, Zheng Wenping and Yu Jian  
OrganizationVanderbilt University; Renmin University of China; Central University of Finance and Economics;; 
Key WordsOil Price Shock; Sorting Effect; Firm Productivity; PVAR; Financial Credits 
AbstractWe primarily explore the static and dynamic impacts of fluctuations in crude oil prices on the performance of Chinese manufacturing firms in terms of firm-level productivity and other relevant indexations. The data we rely on are the annual crude oil price and Chinese annual survey of manufacturing sector conducted by the National Bureau of Statistics over the period 1999-2006. The panel-data regression and panel-data vector auto-regression (PVAR) reveal that the oil price shock generated significantly negative impacts on Chinese overall manufacturing sector with respect to firm-level productivity, sales, and employment. The firm productivity could have been dropped on average 28%-44% due to this exogenous shock. We also find remarkable sorting effect as for firms of different ownerships: the oil price shock produced a positive impact on Chinese state-owned manufactures while a negative one on private-owned plants. Employing a panel-data difference-in-differences estimation approach, we further unveil the sorting effect in the efficiency of using financial resources in counteracting the negative oil price shock for Chinese manufactures. It shows that: the improvement in internal and external finance could have on average increase 23% more for the productivity of the private-owned firms. 
Serial NumberWP985 
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