Does technological progress promote or prevent trade conflict? Evidence from China

    Qian Zhao Affiliation
    ; Chi-Wei Su Affiliation
    ; Adelina Dumitrescu Peculea Affiliation


Using the bootstrap rolling-window subsample Granger causality test from China, this study analyses the influence of technological progress (TP) on trade conflict (TC). The results show that TP can both promote and prevent TC. In 2012 and 2018, TP led to more trade conflicts between China and its trading partners. This result proves the “trade-loss effect”, suggesting that TP in one country promotes TC by threatening other countries’ income. However, TP had a negative influence on TC in 2021 and 2022. This finding is consistent with the “welfare effect”, implying that TP can prevent TC by providing more high-quality and cheaper products for worldwide consumers. This study suggests that the government should adopt appropriate trade policies when encouraging TP to promote bilateral trade. Furthermore, firms should develop their own high-quality irreplaceable products through technological innovation to address TC risk.

First published online 22 March 2024

Keyword : technological progress, trade conflict, rolling-window, bootstrap

How to Cite
Zhao, Q., Su, C.-W., & Dumitrescu Peculea, A. (2024). Does technological progress promote or prevent trade conflict? Evidence from China. Technological and Economic Development of Economy, 30(5), 1256–1274.
Published in Issue
Jul 9, 2024
Abstract Views
PDF Downloads
Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.


Aghion, P., Akcigit, U., Bergeaud, A., Blundell, R., & Hémous, D. (2019). Innovation and top income inequality. The Review of Economic Studies, 86(1), 1–45.

Aghion, P., Bergeaud, A., Lequien, M., Melitz, M., & Zuber, T. (2021). Opposing firm-level responses to the China shock: Horizontal competition versus vertical relationships? (Working paper No. w29196). National Bureau of Economic Research.

Akcigit, U., & Melitz, M. (2022). International trade and innovation (Working paper No. w29611). National Bureau of Economic Researc.

Andrews, D. W. (1993). Tests for parameter instability and structural change with unknown change point. Econometrica, 61(4), 821–856.

Andrews, D. W., & Ploberger, W. (1994). Optimal tests when a nuisance parameter is present only under the alternative. Econometrica, 62(6), 1383–1414.

Azar, G., & Ciabuschi, F. (2017), Organizational innovation, technological innovation, and export performance: The effects of innovation radicalness and extensiveness. International Business Review, 26(2), 324–336.

Balcilar, M., & Ozdemir, Z. A. (2013). The export-output growth nexus in Japan: A bootstrap rolling window approach. Empirical Economics, 44(2), 639–660.

Balcilar, M., Ozdemir, Z. A., & Arslanturk, Y. (2010). Economic growth and energy consumption causal nexus viewed through a bootstrap rolling window. Energy Economics, 32(6), 1398–1410.

Bernard, A. B., Redding, S. J., & Schott, P. K. (2011). Multiproduct firms and trade liberalization. The Quarterly Journal of Economics, 126(3), 1271–1318.

Bustos, P. (2011). Trade liberalization, exports, and technology upgrading: Evidence on the impact of MERCOSUR on Argentinian firms. American Economic Review, 101(1), 304–340.

Cervellati, M., Naghavi, A., & Toubal, F. (2018). Trade liberalization, democratization, and technology adoption. Journal of Economic Growth, 23, 145–173.

Coelli, F., Moxnes, A., & Ulltveit-Moe, K. H. (2022). Better, faster, stronger: Global innovation and trade liberalisation. Review of Economics and Statistics, 104(2), 205–216.

Dai, M., Liu, H., & Lin, L. (2020). How innovation impacts firms’ export survival: Does export mode matter? The World Economy, 43(1), 81–113.

Das, R. C., & Chatterjee, T. (2021). Trade liberalization and R&D activity: Examining long-run and short-run linkages for individual and panel of leading countries and groups. Economic Change and Restructuring, 54(4), 1091–1118.

Deng, L., & Liu, W. (2019). Technological progress trigger trade friction with China: Based on Industrial Level. Journal of Guangdong University of Finance & Economics, 34(2), 4–16.

Dong, G., Kokko, A., & Zhou, H. (2022). Innovation and export performance of emerging market enterprises: The roles of state and foreign ownership in China. International Business Review, 31(6), 102025.

Dorn, D., Hanson, G. H., Pisano, G., & Shu, P. (2020). Foreign competition and domestic innovation: Evidence from US patents. American Economic Review: Insights, 2(3), 357–374.

Eaton, J., & Kortum, S. (2002). Technology, geography, and trade. Econometrica, 70(5), 1741–1779.

Esaku, S., & Krugell, F. W. (2020). Firm-level investment and exporting: New empirical evidence from Ghana and Tanzania. International Economic Journal, 34(1), 125–143.

Farrokhi, F., & Pellegrina, H. S. (2021). Trade, technology, and agricultural productivity (Working Paper, 27350). NBER.

Geng, D., & Kali, R. (2021). Trade and innovation: Unraveling a complex nexus. International Journal of Innovation Studies, 5(1), 23–34.

Grossman, G. M., & Helpman, E. (1995). Technology and trade. In Handbook of international economics: (Vol. 3, pp. 1279–1337). Elsevier.

Hanson, B. E. (2002). Tests for parameter instability in regressions with I(1) processes. Journal of Business & Economic Statistics, 20(1), 45–59.

Houser, K. A. (2020). The innovation winter is coming: How the US-China trade war endangers the world. San Diego Law Review, 57(3), 549–608.

Hwang, H., Marjit, S., & Peng, C. H. (2016). Trade liberalization, technology transfer, and endogenous R&D. Oxford Economic Papers, 68(4), 1107–1119.

Jabbour, L., Tao, Z., Vanino, E., & Zhang, Y. (2019). The good, the bad and the ugly: Chinese imports, European Union anti-dumping measures and firm performance. Journal of International Economics, 117, 1–20.

Javorcik, B. (2020). Global supply chains will not be the same in the post-COVID-19 world. In R. Baldwin & S. J. Evenett (Eds.), COVID-19 and trade policy: Why turning inward won’t work (pp. 111–116). CEPR Press.

Jenkins, R. (2022). How China is reshaping the global economy: Development impacts in Africa and Latin America (2nd ed.). Oxford University Press.

Kim, D. (2021). Measuring the impact of a trade dispute with a supply-side shock using a supply-driven input-output analysis: Korea-Japan dispute case. KDI Journal of Economic Policy, 43(1), 29–52.

Lawrence, R. Z. (2018). Can the trading system survive US–China trade friction? China & World Economy, 26(5), 62–82.

Li, Y., & Li, W. (2022). Are innovative exporters vulnerable to anti-dumping investigations? Technovation, 112, 102409.

Li, Y., Zhuang, X., Wang, J., & Zhang, W. (2020). Analysis of the impact of Sino-US trade friction on China’s stock market based on complex networks. The North American Journal of Economics and Finance, 52, 101185.

Liu, L. J., Creutzig, F., Yao, Y. F., Wei, Y. M., & Liang, Q. M. (2020). Environmental and economic impacts of trade barriers: the example of China–US trade friction. Resource and Energy Economics, 59, Article 101144.

Melitz, M. J., & Redding, S. J. (2021). Trade and innovation (Working paper No. w28945). National Bureau of Economic Research.

Miyagiwa, K., & Ohno, Y. (2007). Dumping as a signal of innovation. Journal of International Economics, 71(1), 221–240.

Miyagiwa, K., Song, H., & Vandenbussche, H. (2016). Accounting for stylised facts about recent anti‐dumping: Retaliation and innovation. The World Economy, 39(2), 221–235.

Niels, G. (2000). What is antidumping policy really about? Journal of Economic Surveys, 14(4), 467–492.

Nyblom, J. (1989). Testing for the constancy of parameters over time. Journal of the American Statistical Association, 84(405), 223–230.

Olper, A., Curzi, D., & Raimondi, V. (2017). Imported intermediate inputs and firms’ productivity growth: Evidence from the food industry. Journal of Agricultural Economics, 68(1), 280–300.

Park, S. (2020). Trade conflict between the US and China: What are the impacts on the Chinese economy? International Organisations Research Journal, 15(2), 153–168.

Paunov, C. (2016). Corruption’s asymmetric impacts on firm innovation. Journal of Development Economics, 118, 216–231.

Pesaran, M. H., & Timmermann, A. (2005). Small sample properties of forecasts from autoregressive models under structural breaks. Journal of Econometrics, 129(1–2), 183–217.

Qin, M., Su, C. W., Umar, M., Lobonţ, O. R., & Manta, A. G. (2023). Are climate and geopolitics the challenges to sustainable development? Novel evidence from the global supply chain. Economic Analysis and Policy, 77, 748–763.

Samuelson, P. A. (2004). Where Ricardo and Mill rebut and confirm arguments of mainstream economists supporting globalization. Journal of Economic Perspectives, 18(3), 135–146.

Shi, Y., Wang, L., & Ke, J. (2021). Does the US-China trade war affect co-movements between US and Chinese stock markets? Research in International Business and Finance, 58, Article 101477.

Shin, S., & Balistreri, E. J. (2022). The other trade war: Quantifying the Korea–Japan trade dispute. Journal of Asian Economics, 79, Article 101442.

Shu, P., & Steinwender, C. (2019). The impact of trade liberalisation on firm productivity and innovation. Innovation Policy and the Economy, 19(1), 39–68.

Shukur, G., & Mantalos, P. (1997). Tests for granger causality in integrated-cointegrated VAR systems (Working Paper). Department of Statistics, University of Lund, Sweden.

Shukur, G., & Mantalos, P. (2000). A simple investigation of the Granger-causality test in integrated cointegrated VAR systems. Journal of Applied Statistics, 27(8), 1021–1031.

Sims, C. A., Stock, J. H., & Watson, M. W. (1990). Inference in linear time series models with some unit roots. Econometrica: Journal of the Econometric Society, 58(1), 113–144.

Slavtchev, V. (2020). Import competition and firm innovation: Evidence from German manufacturing. MICROPROD Deliverable, 3.

Song, L., Garnaut, R., Fang, C., & Johnston, L. (2017). China’s new sources of economic growth: Vol. 2. Human capital, innovation and technological change. ANU Press.

Su, C. W., Meng, X. L., Tao, R., & Umar, M. (2023a). Chinese consumer confidence: A catalyst for the outbound tourism expenditure? Tourism Economics. 29(3), 696–717.

Su, C. W., Meng, X.-L., Tao, R., & Umar, M. (2022a). Policy turmoil in China: A barrier for FDI flows? International Journal of Emerging Markets, 17(7), 1617–1634.

Su, C. W., Pang, L., Umar, M., Lobonţ, O. R., & Moldovan, N. C. (2022b). Does gold’s hedging uncertainty aura fade away? Resources Policy, 77, Article 102726.

Su, C. W., Yuan, X., Umar, M., & Lobonţ, O. R. (2022c). Does technological innovation bring destruction or creation to the labor market? Technology in Society, 68, Article 101905.

Su, C. W., Pang, L. D., Tao, R., Shao, X., & Umar, M. (2022d). Renewable energy and technological innovation: Which one is the winner in promoting net-zero emissions? Technological Forecasting and Social Change, 182, Article 121798.

Su, C. W., Xi, Y., Tao, R., & Umar, M. (2022e). Can Bitcoin be a safe haven in fear sentiment? Technological and Economic Development of Economy, 28(2), 268–289.

Su, C. W., Liu, F., Qin, M., & Chnag, T. (2023b). Is a consumer loan a catalyst for confidence? Economic Research-Ekonomska Istraživanja, 36(2), Article 2142260.

Su, C. W., Liu, Y., Chang, T., & Umar, M. (2023c). Can gold hedge the risk of fear sentiments? Technological and Economic Development of Economy, 29(1), 23–44.

Su, C. W., Yuan, X., Tao, R., & Shao, X. (2022f). Time and frequency domain connectedness analysis of the energy transformation under climate policy. Technological Forecasting and Social Change, 184, Article 121978.

Su, C. W., Yuan, X., Umar, M., & Chang, T. (2023d). Is presidential popularity a threat or encouragement for investors? Economic Research-Ekonomska Istraživanja, 36(2), Article 2129409.

Su, C. W., Pang, L., Umar, M., & Lobonţ, O. R. (2022g). Will gold always shine amid world uncertainty? Emerging Markets Finance and Trade, 58(12), 3425–3438.

Sun, T. T., Su, C. W., Mirza, N., & Umar, M. (2021). How does trade policy uncertainty affect agriculture commodity prices? Pacific-Basin Finance Journal, 66, Article 101514.

Sun, W., Yu, M., Zhang, H., & Zhang, Y. (2022). Does uncertainty of trade environment promote green technological innovation? Empirical evidence from China. Sustainability, 14(23), Article 16195.

Tao, R., Su, C. W., Naqvi, B., & Rizvi, S. K. A. (2022). Can Fintech development pave the way for a transition towards low-carbon economy: A global perspective. Technological Forecasting and Social Change, 174, Article 121278.

Tian, X., Xie, S., Wang, Q., & Wang, X. (2016). Why Chinese exports face so many trade remedy actions: An empirical study based on multi‐country and multi‐industry data. China & World Economy, 24(6), 108–126.

Toda, H. Y., & Phillips, P. C. (1993). Vector autoregressions and causality. Econometrica, 61(6), 1367–1393.

Toda, H. Y., & Phillips, P. C. (1994). Vector autoregression and causality: A theoretical overview and simulation study. Econometric Reviews, 13(2), 259–285.

Wang, L. (2022). China’s Huawei in the US-China Trade War in the communications sector game. In 2022 2nd International Conference on Enterprise Management and Economic Development (ICEMED 2022) (pp. 485–497). Atlantis Press.

Wang, K. H., Su, C. W., Umar, M., & Lobonţ, O. R. (2023). Oil price shocks, economic policy uncertainty, and green finance: A case of China. Technological and Economic Development of Economy, 29(2), 500–517.

Xu, Z., Zhong, X., & Zhang, Z. (2022). Does the Sino–US trade friction promote firm innovation? The role of the export grab effect. Sustainability, 14(5), Article 2709.

Yuan, X., Su, C. W., Umar, M., Shao, X., & Lobonţ, O. R. (2022). The race to zero emissions: Can renewable energy be the path to carbon neutrality? Journal of Environmental Management, 308, Article 114648.

Zeileis, A., Leisch, F., Kleiber, C., & Hornik, K. (2005). Monitoring structural change in dynamic econometric models. Journal of Applied Econometrics, 20(1), 99–121.

Zhou, D., & Chang, Y. (2019). Seven-decade structural transformation of China’s industrial economy. China Economist, 14(4), 14–39.

Zhu, Z., & Zheng, H. (2022). Analysis on the economic effect of Sino-US trade friction from the perspective of added value. Environment, Development and Sustainability, 24(1), 180–203.